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Bank of America Raises Lending After Years of Cuts

David Paul Morris | Bloomberg | Getty Images

Bank of America is ramping up mortgage and corporate lending after two years of focusing on capital levels and cost-cutting under chief executive Brian Moynihan.

Mr Moynihan said the company should overtake JPMorgan Chase in direct-to-consumer mortgage lending in the next six months and he had directed bankers to be "more aggressive" in lending to companies.

His comments to the Financial Times come amid new-found confidence at a bank hit harder than most by the financial crisis, aggravated by a crippling acquisition and the devastation of the US mortgage market.

BofA ended 2012 as the best performer in the Dow Jones Industrial Average, with a 109 percent increase in the stock, which rose an additional 3 per cent on Wednesday after the fiscal deal in Washington.

(Read More: 'I Still Like BofA', More Bank Lawsuits Likely: Whitney)

Much of investors' renewed faith stems from the bank's improved capital position after years of concern stemming from multibillion-dollar compensation claims against soured mortgages, many underwritten by Countrywide, the mortgage lender BofA acquired in 2008.

Mr Moynihan signalled BofA was keen to settle outstanding lawsuits. "Our job is to get them put away at a reasonable basis for shareholders," he said. "Doesn't mean we won't fight if people aren't reasonable. But it's in our best interests . . . to get all this stuff behind us."

Having recently became the first large Wall Street bank to surpass new international capital requirements, Mr Moynihan is signalling that the company is ready to return capital to shareholders next year.

(Read More: Why BofA Weighed Name Change for Investment Bank)

But after a veto by the Federal Reserve in 2011, he refused to be categorical. "The minute I get approval from the Fed you'll know," he said.

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However, despite surpassing the threshold seven years early Mr Moynihan appears to be managing expectations, emphasizing that the bank is yet to establish the earnings track record that would allow the Fed to authorize a large dividend or share buyback program.

(Read More: Bank of America Posts Profit: Shares Move Lower)

BofA has $134.6 billion of tier one common equity, or 8.97 percent of risk-weighted assets, under the new Basel III regulatory standards, the bank said last quarter.

International regulators subsequently revealed that they would demand a ratio of 8.5 percent from BofA – lower than peers such as Citigroup and JPMorgan – under rules set to come into force by 2019.

The chief executive, who has had to endure speculation about his future with the bank, is now widely seen as having earned more time to prove himself. John McDonald, analyst at Sanford Bernstein, said: "I think he definitely has some runway now because they've built credibility. He's got some time to show the earnings inflection. Over the next year or two that's the next benchmark he'll be measured against."

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