Now that many of the institutions outside of the traditional banking system have blown up who is going to be left to capture the lucrative mortgage market? I believe Bank of America is taking mortgage market share and will be able to use the disruption in the credit markets to benefit financially in the long run.
Bank of America has the geographic footprint and market scale to take advantage of the vacuum. They also have a strong deposit base which provides ample liquidity to make loans. With less competition they will have greater pricing power and can hold the line on mortgage loan fees.
Major disruptions and downturns can be a boon to the very best companies - they take market share while lessor companies go out of business. When the market improves the strong emerge even stronger. It may not be a smooth ride, but I believe that Bank of America will be a winner when the dust eventually settles.
Meanwhile, over at Citi, they have just promoted insiders to the CEO and Chairman jobs. This appears to be a board of directors affirmation that the current business model can be fixed. It cannot.
Citi needs to be taken apart and put back together again. Whole lines of business need to be divested. An outsider coming in could have wiped the slate clean in terms of taking all write downs possible. Promoting insiders just continues the pursuit of a business model that has already been proven not to work.
Disclosure: at the time of this posting the author was long BAC.
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