BofA Slowly Implodes

On Friday I wrote this post concerning banking analyst/fund manager's latest Tom Brown's latest comments praising BofA. Brown has been doing this ever since he put his fund's investors into BofA equity back in the spring of this year. I've written several pieces describing his various appearances on Bloomberg television shilling for his positions.

Yesterday came fresh news regarding Bofa's growth prospects. It announced the sale of its Canadian credit card portfolio, part of the expensive business it acquired from former credit-card segment leader MBNA, to Toronto Dominion Bank.

But that's not all. In the same Wall Street Journal article on this sale, BofA disclosed plans to sell several of its European card portfolios, as well.

Now, I distinctly recall Tom Brown talking last week about how much BofA was going to be growing earnings in the future.

But when a bank sells credit card portfolios, it's a signal that the bank is in serious trouble. Never mind the excuse BofA gave- to focus on other management issues.

Credit card lending is a core bank business. It's a bread-and-butter consumer business. A key component of relationships with consumers.

For BofA to be auctioning off its overseas credit card portfolios is to basically concede the final loss of international business which began with Sam Armacost's initial troubles back in the 1980s. Back then, BofA began dismantling its overseas network, then one of only three among American money center banks.

Since growth in the US, a developed economy, is probably going to be slower than overseas growth, BofA is essentially withdrawing from the sort of growth opportunities which Tom Brown promised would be coming in just a few years.

It's understandable, with similar examples among large US banks now over 20 years old, that many pundits and analysts aren't comprehending the gravity of this latest BofA move. But I vividly recall credit card portfolio sales as a harbinger of the decline of commercial banks. The resignation of a bank's management to balance sheet problems by, in effect, selling the silver to meet the mortgage payment.

That's what BofA is now doing.