Bank of America to save Countrywide

In an unexpected turn of events, news out of North Carolina today says Bank of America Corp will purchase Countrywide Financial for $4 billion in stock.

Bank of America is saving Countrywide Financial from the subprime disaster they are wallowing in. The financial service company commands an impressive stake in US finances as it is as the country's largest consumer bank. The move will save Countywide, which many speculated would soon file for bankruptcy.

Countrywide Financial has been hit hard with the recent housing market slip and as the nation's foreclosure rates hit record numbers. Countrywide Financial has a large stake in the subprime mortgage sector faltering in the States.

At the tune of $4 billion in stock, this purchase will secure Bank of America as the country's largest mortgage lender and loan servicer. The deal provides current Countrywide stock holders with 0.1822 of a share of Bank of America stock for one share of Countrywide stock.

Bank of America stock is expected to be neutral through 2008. The purchase will not close until the third quart of 2008. It is expected to lift EPS in 2009. By 2011, Bank of America expects to realize some $670 million in after tax cost savings in the transaction.

Bank of America Chief Executive Ken Lewis said in a statement released Friday, "Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers."

Lewis is being called a market saviour in terms of keeping the industry and regulators from having to determine who will collect payments and manage Countrywide Financial Corp's home loans if and when the company were to file for bankruptcy. Still, economist believe this to be a risky move for Bank of America as there is little hope of a strong short term return on the sale. In the long term, Countrywide seems to offer more hope, with a likely profitable future.