The Board of directors of Bank of America Corp. (BAC) has named Mukesh D. Ambani, chairman and managing director of India-based Reliance Industries Limited as a director. Mr. Ambani will have to get himself elected at BofA’s 2011 annual meeting of shareholders.
BofA looks to bank on Mr. Ambani’s strategic zeal and operational excellence. The company expects to benefit from his judgement and expertise and thereby bloom and grow in the coming days. His global perception is also expected to benefit the company.
We believe that such an action on part of BofA is aimed at increasing its business in the subcontinent, particularly in India, where Mr. Ambani heads the largest private business enterprise, Reliance Industries. He has been in that role since 2002 and the business has over $70 billion in market capitalization.
His expertise in risk management and strategic planning across a gamut of businesses, including energy, information and communications technology, and retail networks is well recognized and BofA stands to benefit from it following his election.
Post financial crisis, BofA is seeking to generate significant revenues outside the U.S. Therefore this appointment may help the company in doing so, by leveraging India’s growing economy.
Mr. Ambani joined Reliance in 1981. Reliance currently enjoys leadership positions on a global basis in exploration and production, refining and marketing and petrochemicals.
Last month, BP Plc (BP) and Reliance Industries Ltd. entered into a partnership for a deepwater oil and gas exploration program in India. The $7.2 billion deal highlights BP’s endeavor to make up for last year’s Gulf of Mexico oil spill by focusing on the world’s fastest growing energy market.
Additionally, Reliance operates a retail network that connects thousands of Indian farmers and suppliers to millions of consumers through more than 1,000 stores across the country.
Our Take on BofA
Latest efforts to reduce mortgage repurchase concerns on the GSE front are expected to result in manageable losses for BofA. Though the company is poised to benefit from its large scale operations, prudent capital management, non-core asset shedding and improving credit quality, concerns related to rising expenses, pressure on net interest yield and limited claim experience for non-GSEs will resist bottom-line expansion in the near term.
BofAcurrently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. However, considering its fundamentals we have a long-term Neutral rating on the stock.
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