BofA (BAC) To Exit Association With Private Prison Companies

Bank of America (NYSE:BAC) decided to distance itself from the operators of private prisons and immigrant detention centers. As a result, the banking giant will stop providing finance to these companies, becoming the third bank to exit relations with the sector after realizing it was too risky.

Before BofA, JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) announced plans of breaking off relationships with the industry.

Amid the tightening immigration policies under President Trump, protests against the financing of the prison industry have increased. Activists are protesting against private prison companies as they believe that these companies are trying to profit from the detainment of people and children.

Notably, at BofA’s annual shareholder meeting in April, protesters questioned CEO Brian Moynihan as to why the bank had still been providing finance to private prison companies even when other banks started to back off.

BofA’s decision to exit the industry comes after the company's environmental, social and governance (ESG) committee recently conducted a review, which included visiting sites, and consulting civil rights activists and experts.

The company’s vice chairman, Anne Finucane stated, “We have decided to exit the relationship. We’ve done our due diligence that we said we would do at the annual meeting, and this is the decision we’ve made.”

Notably, CoreCivic Inc and GEO Group Inc are the two major companies in the United States that operate private prisons. BofA along with other banks have underwritten bonds or syndicated loans for these companies in the past.

After BofA’s decision to exit relations with these companies, GEO Group, however, said that it will not have an impact on its credit facility, which was recently extended through May 2024.

In the past few weeks, concerns over detention centers have increased amid reports of below average conditions at facilities for migrant children.

While the above-mentioned companies operate private prison centers on behalf of U.S. Immigration and Customs Enforcement, they have made it clear that they do not run facilities that house unaccompanied minors.

In fact, George C. Zoley, the CEO of GEO Group, stated, “The GEO Group has never managed any facilities that house unaccompanied minors, nor have we ever managed border patrol holding facilities.”

Shares of BofA have gained 14.4% over the past six months compared with 11.3% growth of the industry it belongs to.




Currently, the stock carries a Zacks Rank #4 (Sell).

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