Bank of America (BAC) released its 1st quarter results this morning and unfortunately for shareholders, earnings were a miss. Analysts had a mean estimate of $0.23 per share on estimated revenues of $23.39 billion, actual EPS came in $0.03 short at $0.20 on slightly higher than estimated revenues of $23.5 billion. This is the first earnings miss since the same quarter last year. Below I have outlined highlights from the quarter as well as my take on them.
- EPS of $0.20 below estimated $0.23.
- Revenue of $23.5 billion slightly above estimated $23.39 billion.
- Book value of $20.30 up from $20.24 in 4Q2012.
- Tangible book value of $13.46 up from $13.36 in 4Q2012.
- Long-term debt down $75.3 billion from a year ago.
- ROA in the 1st quarter of 0.48% up from 0.13% in 4Q2012.
- Net charge-off ratio of 1.14 down from 1.40%.
- $5 billion of stock buybacks and $5.5 billion of preferred redemptions.
- Interest income down on lower loan balances (at the same time deposits are up 5% from 1Q2012).
- Net interest margin of 2.43% up from 2.35% in 4Q2012 but down from 2.51% in 1Q2012.
- Litigation expense of $881 million.
- Consumer real estate service revenue $23.1 billion which resulted in a loss of $1.31 billion, down from a loss in the prior year of $1.14 billion.
My Take - Why Put Your Money Here?
Investors have the option to invest in any bank or company they want and will have to decide how much longer they want to wait for more return. BAC shares have performed similarly to the other big banks this year on less than comparable operational results.
Recent Earnings Releases:
Not to sound so negative, I personally bank at BAC and have no problems with the services I receive. I have also held shares and would purchase shares again... but only at the right time and price, both of which I do not believe are now. Management has a tough road ahead and has had to focus on shedding assets (more than $60 billion since 2010) and settling mortgage claims (over $40 billion since 2010). I do believe the clean-up will bear fruit in the future but would rather hold onto stronger companies, and especially when markets are near their all-time highs. Management's efforts have given BAC a stronger balance sheet but I start to wonder when I see loan balances declining at the same time deposits are rising, and losses on the mortgage front when real-estate is rebounding. I hope BAC investors have a strong gut and long-time horizon because that's what it's going to take to stay in on this bet.
Shares opened this morning down 3.6%.