BofA Cashes In

Bank of America (BAC) has capitalized on investors' growing appetite for financial stocks, raising $13.5 billion through the sale of common stock, half of that haul raised on Tuesday, the business press report this morning. According to the Wall Street Journal, BofA is looking "to create a $33.9 billion buffer to meet the U.S. government's stress-test requirements and fortify the bank against future losses as its loans and other assets are hit by the recession." With the successful share sale and its recent sell-off of its stake in China Construction Bank, it's more than halfway there. The Los Angeles Times points out the deal has created a hefty dilution of value for BofA shareholders as the share price has fallen 21 percent since the fire sale began, well underperforming the sector. 

Meanwhile, other TARP recipients are already planning a payback timetable to get Uncle Sam off their backs. The New York Times reports several of the healthiest TARP recipients have begun formal discussions with regulators to pay back their portion of the $700 billion bailout fund they borrowed last autumn. Those banks include JPMorgan Chase (JPM), Morgan Stanley (MS), Bank of New York Mellon (BK), State Street (STT), U.S. Bancorp (USB), and Goldman Sachs (GS), the newspaper reports. "Many insist they will do so by year-end," the NYT adds. But the federal government wants them to hold off for a bit. Next month, the Fed will identify which ones are fit to leave first.

The WSJ this morning leads off its coverage with an investigative piece that finds that banks have found a novel way to fund executive pay: through massive life insurance policies that act as quasi pension funds for top brass. According to the WSJ, banks are "holding life-insurance policies on hundreds of thousands of their workers, with themselves as the beneficiaries." Most of the policies were taken out during the go-go days of the mortgage bubble when bonus payment obligations ballooned alongside property values. It might not surprise you to hear which bank has the largest amount of life insurance obligations taken out on its employees. According to WSJ, it is BofA, which has insurance obligations of $17.3 billion at the end of the first quarter taken out on its employees; Wachovia (WB) and JPMorgan Chase have $12 billion and $11.1 billion, respectively, taken out. The practice is not illegal nor even improper, per se, but critics howl it's a way for banks to get lucrative tax breaks for compensating executives.

Hewlett-Packard (HPQ) announced another 6,400 job cuts and reduced its sales outlook after posting a 17 percent drop in quarterly profit, CNNMoney.com reports. The granddaddy of Silicon Valley blamed weak PC sales for the continued slump, with desktop and laptop sales down 13 percent and 24 percent, respectively. HP commands a 21 percent market share in national PC sales, which accounts for more than one-third of the company's revenue. Every quarterly earnings session now ends with analysts and journalists looking for signs that the end of the recession is in sight. Yesterday, HP CEO Mike Hurd demurred saying: "We see some encouraging signs, and we saw some slight improvements with the U.S. consumer. I'm just not ready to call it better."

Electronic-car upstart Tesla this week received a $50 million vote of confidence from German carmaker Daimler, Business Week reports. The two companies already had a loose partnership—Daimler intended to generate 1,000 all-electric versions of its Smartcar using Tesla's battery technology—but now the pioneer of the internal combustion engine will take a 10 percent stake in the California niche automaker as it races to meet the challenges of a fast-changing automobile industry. "This industry is going through a kind of paradigm shift, and has to reinvent itself ultimately to be independent of petroleum and without CO2 emissions. We need fast technology change," says Dieter Zetsche, chairman of the board of management of Daimler and head of Mercedes-Benz Cars.

Finally, Royal Dutch Shell shareholders yesterday took out their anger on executives for a slumping share price and smaller earnings. In a rare revolt at the company, some 60 percent of shareholders voted down the executive pay package doled out in 2008, the BBC reports. As the NYT points out, the defeated Shell pay package is merely symbolic, but it does hold weight. "Their actions may be limited, but they can make a noise and embarrass people, and embarrassment goes a long way in this environment," Justin Urquhart Stewart, an investment management expert, told the NYT.