Inside Financial Services

THIS IS WHAT HAPPENS WHEN YOU HAVE TO SELL NEAR THE BOTTOM OFF THE CYCLE

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From the standpoint of sheer dollars forgone, BofA’s sale of First Republic in 2010 isn’t close to its worst deal of all time. Still, this was one colossal bungle:

Few objected when Bank of America chose to sell First Republic Bank in 2010 for $1.86 billion to a group that included existing management and buyout firms Colony Capital and General Atlantic, though clearly this is a deal the beaten up banking giant wouldn’t mind having back.

Less than six months after making their acquisition, First Republic’s buyers took the bank public at a value of $3.27 billion. Since then, the shares have run up another 21%, while Bank of America shares are down some 30% over the same period of time. As of Friday’s close, First Republic had a market cap of $4.4 billion. [Emph. added]

So the bank sold for $1.86 billion a unit that would be worth $3.27 billion just six months later. It’s true of course that BofA didn’t have much choice in the deal’s timing and was forced into a quickie sale. Still that’s got to hurt down in Charlotte. . . .