Why B of A Is Getting Hammered Today
Feb 20th 2013 2:07PM
Updated Feb 20th 2013 3:15PM
About midway through the trading day, shares in Bank of America are already down by 1.48%, and seem in no danger of stopping that downward trajectory anytime soon.
Are investors reacting negatively to news that CEO Brian Moynihan is about to get a big pay raise, or is this just another day where the free market's invisible hand is slapping the superbank's investors around?
Spreading the wealth just a little too far?
According to a B of A regulatory filing, Moynihan's total pay package for 2012 will top $12 million. For 2011, he was paid just $7 million. The pay package includes a base salary of $950,000 and restricted shares worth $11.1 million. That's a 71% pay hike. We should all do so well, and maybe that's what's on investors' minds today.
True, the bank did very well for shareholders last year: Those who got in at the beginning of 2012 found themselves with a better than 100% return on their investment. So maybe the board's thinking is that the bank's 100% justifies Moynihan's 71%.
But if share-price performance was the determining factor in his raise, remember that B of A's starting 2012 share price was $5.80; it had almost nowhere to go but up. Financials led the S&P 500 in 2012 in large part because every bank and its mother was starting from a near dead stop.
"Part of  is about where you start from," Financial Times Stephen Foley quipped earlier this year. "Banks have underperformed in seven of the past eight years. The five best performers [of 2012] were all in the bottom six in 2011."
The market as mad scientist
So investors might be reacting negatively to the pay-hike as undeserved (I would be, if I owned shares), or this 1.19% drop might just be the vagaries of the market at work, with nothing in particular driving B of A share prices down.
The market is yielding mixed results today: a little bit of up, and a little bit of down. The S&P 500, Dow Jones Industrial Average, and the Nasdaq are all down so far. Fellow superbank Citigroup is down as well. In contrast, JPMorgan Chase and Wells Fargo are both up slightly.
Remember that a large part of investing Foolishly is thinking long term. "Get rich slowly" is one of The Motley Fool's mottos and my personal favorite. B of A might be down a bit today and up a bit tomorrow, but so long as you have faith in the company for the long term, your money is where it's supposed to be.
But don't let this lone Fool get in the last word on B of A. Check out our in-depth report on everyone's favorite superbank, written by Anand Chokkavelu -- The Motley Fool's senior financial sector analyst and Bank of America specialist. He'll analyze B of A's prospects and give you three reasons to buy and three reasons to sell. For immediate access, just click here.
The article Why B of A Is Getting Hammered Today originally appeared on Fool.com.Fool contributor John Grgurich owns shares of JPMorgan Chase. Follow John's dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich . The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a simply cracking disclosure policy.
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