BofA Curbs Loan Type After Steinhoff Loss -- WSJ

By Rachel Louise Ensign

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 21, 2018).

Bank of America Corp. has wrapped up its internal review of its $292 million loss involving troubled South African firm Steinhoff International Holdings NV and dialed back its appetite for the type of stock-based loan that caused the loss, people familiar with the matter said.

Bank of America was one of a number of global lenders that held pieces of a EUR1.6 billion ($2 billion) loan to Christo Wiese, then chairman of the South African retailer. Mr. Wiese's shares in the company served as collateral for the financing. Those shares collapsed in value last fall after the retailer, which owns Mattress Firm and the Sleepy's brand, disclosed accounting irregularities.

The bank said in a statement Tuesday that its review of the loss is finished. It said the responsible thing to do with such a loss is to "review it carefully, see if we missed something, and apply any lessons for the future," adding that the "core cause" of the loss was due to the behavior of another party.

The review has led the bank to dial back its appetite for collateralized loans to individuals that are backed solely by a borrower's holdings of a single stock. These loans leave a bank with few good options if the stock price collapses.

The collapse in the Steinhoff share price hit Mr. Wiese's lenders hard. In addition to Bank of America, Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group disclosed losses to what was typically described as a single-name client in the fourth quarter.

The company involved, people familiar with the matter said, was Steinhoff. The four banks booked a combined hit to fourth-quarter earnings of more than $1 billion. Late last year, Bank of America hired Davis Polk & Wardwell LLP to help it examine the Steinhoff loss and figure out if it could somehow have been avoided.

(END) Dow Jones Newswires

March 21, 2018 02:47 ET (06:47 GMT)

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