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Osiris Farol  

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  • Bank Of America: Expect Stock Buybacks To Accelerate In 2014 [View article]
    You are right the DTA is not included in Tier 1 capital under B3. However, I am not sure the extent to which the consensus estimate for 2014 eps of $1.36 already includes DTA-related tax effects.
    Oct 7, 2013. 12:12 AM | 1 Like Like |Link to Comment
  • Bank Of America: Expect Stock Buybacks To Accelerate In 2014 [View article]
    Thank you for comment; you are correct.

    I believe management has stated they are targeting a 9% Tier 1 ratio so the analysis stands but, as you note, this is higher than the B3 requirement of 8.5% at least excluding any counter-cyclical buffer that may kick in at a national level if and when the economy and credit growth recover.
    Oct 6, 2013. 11:59 PM | Likes Like |Link to Comment
  • Bank Of America: Expect Stock Buybacks To Accelerate In 2014 [View article]
    I think what you are missing is that until the last quarter BAC had not bought back any common stock since the financial crisis. There was therefore nothing to offset the compensation-related issuance of stock and stock options to management, and the increase in the diluted share count (used in eps calculations) arising from the increase in the stock price.

    This changed in the second quarter when BAC repurchased $1 billion of common stock, and I expect it to keep at least that run-rate going until the second quarter of 2014 when it will likely increase meaningfully following this year's CCAR process and March 2014 increase in Fed authorization for stock buyback to the $10 billion mentioned in the article.

    As a long-term shareholder, you might rationally want the stock price to fall so that the buyback retires more shares; if the stock price rises, however, I imagine that will not be too disappointing.
    Oct 6, 2013. 11:54 PM | 3 Likes Like |Link to Comment
  • Bank Of America: Buy A Dollar For Around 85 Cents [View article]
    Kinte - the cfo has commented that bac expects to be "balanced" and work through the share repurchase authorization over the course of the year. I wish we had some sense of whether the stock price factors into timing.
    Apr 18, 2013. 02:26 PM | Likes Like |Link to Comment
  • Bank Of America: Buy A Dollar For Around 85 Cents [View article]
    Fifth Capital - Thank you!
    Apr 18, 2013. 01:27 PM | 1 Like Like |Link to Comment
  • Bank Of America: Buy A Dollar For Around 85 Cents [View article]
    MexCom - A release of litigation reserves is possible; unfortunately, it is also possible that the reserves (because of the accounting requirements for establishing them) will not be sufficient. Indeed, BAC estimates a maximum possible loss, over and above established reserves, of $4 billion.
    Apr 18, 2013. 01:26 PM | 1 Like Like |Link to Comment
  • Bank Of America: Buy A Dollar For Around 85 Cents [View article]
    Speedy12 - If you take a look at the earnings transcript, you will see a discussion between the CFO and an analyst on the modeling errors.
    Apr 18, 2013. 01:24 PM | Likes Like |Link to Comment
  • Wells Fargo Earnings: A Case Study On The Institutional Dynamics Of Wall Street [View article]
    Under Sarbanes-Oxley of 2002, a CEO or CFO who wilfully files a false certification that the annual and quarterly reports "fairly present" the finances of a company can be fined $5 million or jailed for up to 20 years.

    Richard Scrushy, former CEO of Healthsouth faced criminal charges for false certification but was acquitted. A number of executives at companies involved in the mortgage crisis, including Fannie Mae, Freddie Mac and Countrywide, faced civil charges for false certification. I am surprised none of the executives at major banks faced similar charges in the aftermath of 2008.

    Nonetheless, senior executives have an incentive not to wilfully mis-report; of course, this does not relieve the risk of incompetence or good-faith error.
    Jan 21, 2013. 08:35 AM | Likes Like |Link to Comment
  • Wells Fargo Earnings: A Case Study On The Institutional Dynamics Of Wall Street [View article]
    Thank you! The mix-shift in liabilities does not seem to be enough taken into account and, of course, will reverse when short rates back-up and the opportunity-cost of checking deposits rises. I wonder whether the complaint will then be weaker deposit growth!
    Jan 14, 2013. 09:23 AM | Likes Like |Link to Comment
  • Wells Fargo Earnings: A Case Study On The Institutional Dynamics Of Wall Street [View article]
    Thank you to both Ray Merola and dneedle1!
    Jan 14, 2013. 12:22 AM | Likes Like |Link to Comment
  • Bank Of America: Why A Stock Buyback Is More Likely Than A Dividend Raise [View article]
    You are right about the goal. Here is what CEO Brian Moynihan said in Jul 2011: "We need to get back most of the shares we issued in the crisis, that caused all the dilution". The link is below:

    (http://bit.ly/Sr1AdR)
    Jan 12, 2013. 01:24 PM | Likes Like |Link to Comment
  • Bank Of America: Why A Stock Buyback Is More Likely Than A Dividend Raise [View article]
    It is an excellent question, and one that has no clear answer.

    Aside from tax effects, and if you believe the stock is fairly valued, a stock buyback makes no theoretical difference to intrinsic value as explained here http://bit.ly/Y0azEF.

    However, theory and practice seem to differ since research suggests the announcement of stock buybacks does lead to an increase in stock prices. A possible explanation is the signaling effect: if management, which is presumably better informed than outsiders, chooses to buyback stock then there is a possible signal that market value is below intrinsic value.

    This may be true in some cases but is not right now for WFC (as an example). The bank is buying back just enough shares so that share-based compensation to employees does not increase the share-count and hence tend to reduce earnings-per-share.

    This sort of accounting-based policy means there is no signal about intrinsic value in the stock buyback: indeed, it suggests management will buyback stock whether or not the price is below intrinsic value so that, if it is not, the policy can be value-destroying to continuing shareholders.
    Jan 12, 2013. 11:17 AM | 1 Like Like |Link to Comment
  • Bank Of America: Why A Stock Buyback Is More Likely Than A Dividend Raise [View article]
    Thank you
    Jan 11, 2013. 04:41 PM | Likes Like |Link to Comment
  • Bank Of America: Why A Stock Buyback Is More Likely Than A Dividend Raise [View article]
    With the new rules (allowing banks to make a one-time downward revision to the capital plan in their initial submission before the Fed makes a formal ruling), it is less risky to ask for a dividend-raise than last year.

    However, the banks seem highly averse to the risk of capital plan rejection - so much so that C is not even asking for a dividend raise this year. I expect BAC will follow the same route particularly given it has higher earnings variability and mortgage litigation risk.
    Jan 11, 2013. 04:39 PM | Likes Like |Link to Comment
  • Bank Of America: Why A Stock Buyback Is More Likely Than A Dividend Raise [View article]
    You raise an interesting point, and I would agree if the stock price were higher.

    As it is, I think management will prefer buying back common stock at ~40% discount-to-book over paying a 5% premium-to-book to repurchase any of Buffett's $5 billion of preferred shares (even though, at 6%, the dividend costs them $300mm/year).

    I could be mistaken, however.
    Jan 11, 2013. 04:23 PM | 1 Like Like |Link to Comment
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