You kind of saw this one coming. Bank of America is crazy to take Countrywide Financial’s balance sheet onto its books. Apparently, S&P Equity Research agrees and correctly downgraded BofA to a sell rating because of the risk.
Note: Oppenheimer’s Meredith Whitney expects BofA to eventually be forced to cut its divided.
“We take unfavorable note of the large Countrywide option-adjustable rate mortgage portfolio that Bank of America will inherit, since we believe this portfolio has yet to be stress tested.”
–MarketWatch, 20 Jun 2008
BofA is nuts: still going to acquire Countrywide