Personal Finance

Paul Ryan Just Made Bank of America's Year

BAC Book Value (Annual) Chart
BAC Book Value (Annual) Chart

BAC Book Value (Annual) data by YCharts .

This isn't a bad thing from a safety and soundness perspective, as many people believe that a lack of capital caused the crisis in the first place. I don't agree, as I think the abuses that fueled the crisis came from outside the traditional bank industry, from investment banks such as Lehman Brothers and mortgage brokers such as Countrywide Financial. The point being, undercapitalized commercial banks weren't the core issue a decade ago.

Either way, while requiring backs to hold more capital should indeed make them safer, it also makes it hard for banks such as Bank of America to generate the type of profitability that investors expect from a bank its size . Consequently, if the regulatory reforms free banks up to distribute more capital to shareholders, thereby purging the funds from their balance sheets, it will translate into higher profitability for Bank of America and, almost certainly as a result, a higher stock price as well.

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John Maxfield owns shares of Bank of America. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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