Earnings Preview: Bank of America

Bank of America (BAC) is expected to report Q2 earnings before market open Monday, July 18, with a conference call scheduled for 9:30 am ET.

Guidance

Analysts are looking for EPS of 53c on revenue of $18.37B. The consensus range for EPS is 20c to 78c, while the consensus range for revenue is $16.02B to $20.39B, according to First Call.

Analyst Views

Bank of America's Issuer Default Rating was downgraded by Fitch to A+ on July 16. The ratings firm said it made the decision because of the potential negative effects of the mark to market valuations in several of the bank's capital market units. Fitch also cited headwinds in the bank's consumer credit portfolio.

According to reports published on July 14, Bank of America moved Countrywide's debt to a subsidiary indirectly owned by Bank of America. As a result, it is unclear whether the bank will take responsibility for Countrywide's debts.

On July 11, Citigroup lowered their Q2 EPs estimate for Bank of America to 51c from 75c, due to anticipated credit costs and mark to market write-downs. Citigroup maintained their Hold rating on the bank.

Bank of America's CEO on July 9 said he saw no reason to reduce the bank's dividend or raise cash for the bank. On July 9, Credit Suisse said they had a cautious outlook on Bank of America.

Comments

[N.A.PANDISCIO/NAPPER]

MOVING COUNTRYWIDE'S DEBT TO A SUBSIDIARY DOES NOT ADD TO BANK AMERICA'S CREDIBILITY

[User 227846]

Moving C Wide's debt to a sub is a smart move, may be , at least not dumb. C wide would have gone bust without the BAC recovery. Thus , there is no reason to be a philantrophic organisation and I hope Ken Lewis has played hard ball before picking up a moribund organisation.
Citi to comment on BAC is kind of arrrogant if there analysts were that smart they should have told their executive management not to lose USD 30 billion or more with funds from the Mid East plugging the gaping holes
It is also kind of pathetic( "the mustard gets up my nose") for every DA's in State governments like Ca and Flroda to sue C-Wide which is like suing a corpse and feast on if BAC had not recued a carcass and the havoc it would have reaped on the US domestic Fin ancial System
there was not a hidden gold mine in C -W£ide but rather a Chapter VII

[User 227846]

RALPH SCHAUSS, LONDON

[DonSuper]

I agree with Ralph, unfortunately dumb media, politicians, and analysts dont seem to be able to see things clearly (or dont want to)...

[in4thelonghaul]

The nice thing about the recent runup in sh/pr...even if BAC misses, there is now a solid floor. It would take a pretty big miss, combined with poor guidance, to even result in BAC retracing to $22.00 let alone breaking $20.00. With the shorts apparently muzzled, at least to a degree (since the OMM retains their dirty exemption and can thus print airshares at will), BAC will not see the unimpeded stampede to the downside which was a real likely prospect upon an earnings disappointment hitherto.

GL to all longs...

[CharlestonInvestor]

I don't think the shorts are dead, and any bank stock can fall at any time, but the shorts are very SCARED after seeing how these banks rallied this week. It is a much bigger leap of faith now to short anything. We are a tropical storm away from 150 oil and a bad BAC guideance from 15 BAC. I think BAC will beat, keep the dividend, and make CFC look like a better buy than Bear Streans for JPM in the next 3 years. The 4 guys posting comments here can buy an investment bank with our pocketchange by Christmas, but BAC gets to service the 75% of CFC loans that make it over the next 30 years. I know everything thinks this is a joke, but CFC is a steal. Set aside 10 billion in write downs, 5 billion to pay off the judgements, and cash 50 billion in checks.

[User 158416]

you have it excatly RIGHT..
BAC has a future of constant flow of mortgagae payments..
the servicing of these will result in a base of earnings for
the next few decades.
BAC in the 30's in 09..write it down.

droffilc8

[vaduz]

lets see mondaymorning. a bad figure will put enormous pressure on all bank stocks, not only bac

[Callandscaper]

I am deep in the trenches. Not only did I invest heavy in Banks, I am a landscaper in California. Still, the house payment is paid on time. My neighbor worked for Del Webb 10 years. Pultie homes bought the Sun City project and he finally got his pink slip. How are we making it? He is working on small jobs and for a local Taco Bell owner remodeling.
My customer base has turned into locals instead of new arrivals building homes. The jobs are smaller so I have one or two clients a week where before it was 1 client every 6 weeks on the bigger jobs.
My fuel bill went from 1000.00 per month to 1800.00 That's more than the house payment. I have cut costs by paying my guys by the mile instead of the tank, Shop more at Costco. I am holding off buying a new service truck until 2010 when the new diesel that gets 30 mpg comes out(made in India and put together here.) I am getting rid of my storage shop and working out a deal with a local gravel supplier to save $600.00 per month. Cut the book keeper back to every other week. Laid off one employee who will do fine with his own route I helped him build. Not blowing money on look good advertising. I am raising my rates 10%. So the times are a little tough and everyone cuts back. The bad business plans will fade away. The glut of other landscapers will fade and the smart guys who plan out a few years ahead will be stronger then ever. I look at my great Aunt and Uncle in their 90's and they survived the 30's and 40's. Banking will never go away and the price of stock just gets better for long term. BofA will not go bust nor will other high dividend top dog Banks around the world. I have had to write off 20 percent of my budget on bad client debt more then once in twenty three years with cheating builders and I am still here. I am keeping 40 percent in cash and I am letting the rest ride as I add more. If I lose so will the rest of the world. Just in case, I am growing my Vegetables and saving $6.00 a pound on Heirloom tomatoes.

[Ames Tiedeman]

Will BAC cut the dividend? I was surprised WFC increased their dividend by 10%.
I do not know how these banks will have healthy earnings for some time. I do not know how they can be paying these dividends and at the same time issuing more stock to dilute their shares and increase their pay out at the same time! Makes little sense.

[Dan Schmeidler]

The government was foolish to interfer in the financial equity markets of the banks. To me, that was the give-away. At first I almost broke my skull by hitting my head against the wall because I could not for the life of me figure out why the feds are attempting to rescue the value for the shareholders and investors in these companies. Wouldn't it be wiser to allow the equities to go to zero and then just sell off the assets to the debtors. I mean, that is kind of what is going on right now, except that the companies themselves are doing it. Bancruptcies would at least preserve the credibility of the US as a debtor nation and save our dollar. The sooner we allow the debtors to take over, the sooner we will come out of the recession. Capitalizing these companies over and over again only allows these companies to continue to write-down their inflated balance sheets. Such erosion of capital (from the balance sheets of these companies) contributes to the contraction in the credit markets. The write-offs do not result in the ability of the financials to generate all sort of income producing assets. Capital infusion only serves to pump life into the equity section of the companiy so that it can continue to function or just "live". We should not allow these companies to continue with those write-offs because it also erodes the value of the debt that we owe as a nation, (as is the case with FNM and FRE, assuming explicity), and also eroding our standing as a debtor nation (and that we certainly are). The better solution is to bring this nonsense to an end and let the debtor call the shots so that we can move on with capital expansion. Let all 19 institutions recently protected by the government from naked short selling all come to zero equity. Have a fire sale on their assets. The proceeds of every dollar generated from such a sale would be worth significantly more then the value of the dollars currently being infused into these entities.

[c2farr]

Welcome to America, land of Socialism for the Rich, rough and tumble capitalism for the poor. When the folks who live poor (or middle class) and vote rich get a brain and send the Rethuglicans the way of the Whigs, we will start getting back on track.

When Cheney nominated himself for VP he was just itching to get us into an endless war for the benefit of his baby Halliburton. Their stock price has gone from a low of $5 at about the time the decision was made in 2002 to go war in Iraq, to a recent high of $55. American taxpayers continue pumping billions into the no-bid contracts for Halliburton.

Rescuing the failed banks at taxpayer expense fits precisely the agenda of the gang occupying our White House. America is long overdue for the change coming in November. Time to scrape together the remnants of our nation's reputation and rebuild.

[rj_gordon40]

I am a senior who invested in preferred stocks with countrywide capital.At the time,all I knew was that countrywide was the largest mortgage lender in the u.s.a. and it seemed like a safe investment.this income adds to my social security.I'm sure there are many more people in the same boat with countrywide.If BaK claims bankruptsy on countrywide debt which it sounds like they have been planning from the beginning,what kind of message does this send to investors?Very few large companies have done this in the past.If this acts as the future inspiration to large companies,no one will want to hold preferreds or bonds,for fear that any company that purchases another will just put their debt into bankruptsy.Seems to me that this is premeditated and should not be legal,and what about other companies and individuals that have invested in BaK bonds and preferreds.why doesn't BaK just dump them too.where does this end.Bring on the lawsuits.they deserve it if this is their intention.

[Dan Schmeidler]

The federal government has made so many mistakes recently, it is becoming unconsnoiable to just be thinking about it. We had a perfectly free and efficient market system in place until the federal government decided that it is single-handedly going to determine the outcome of this credit crises and force their determination on the outcome upon the market place. I believe that there was no crises to begin with, only a shift in credit. The intervention of the feds and the central bankers is now more apparent than ever, and this only adds to the instability in the markets. This is because at the core of the problem are all those securitizations of mortgages that originated in the US (including those recycled and repackaged by FNM and FRE) and that ended up as debt held by foreign governments or even US pension funds. These institutions and governments that hold this debt are now questioning the dubious policies of the US government and its central bank. As a massive debtor nation, the US has so far been able to keep its creditors happy. This recent trend by the feds can lead this crises into an even more dangerous and treacherous path.

[Dan Schmeidler]

oops ... unconscionable of course

[mark mchugh]

Short term, You might as well buy anything on the SEC's "Sacred Cow" list.

[Ames Tiedeman]

BAC rallied 10 points last week. Risky going into earnings.