Contributor since: 2013
John/Jack - Possible but I'm not sure how likely it is. There will be a ca. 7c/share EPS benefit accruing over the next year from the recent rise in long rates, but for there to be really be a kick-up in NII from rising rates, short rates would have to rise as well.
6742, Darcangelo - I am no accounting expert but here are a few points for consideration:
0. Yes certain of the bonds they holds have to be MTM - but that depends on whether they are held for trading or are actually kept until maturity.
1. Banks have a view on the interest rate cycle and will attempt to hedge accordingly. This has both a cost and a risk that the hedges won't work out.
2. The quantitative answer will depend on what size of move and what timeframe (clearly an instantaneous move would be expected to have the largest effect before hedging, but then are talking short term rates or long term rates moving?).
3. Consider why BAC (and many other banks) have to hold these bonds: They have more deposits than they are able to/want to make loans at this point. This holds for pretty much any bank out there and all will be affected in a similar manner.
4. A MTM 'loss' from an increase in rates would, I think, be taken through AOCI (part of equity, so not through the P&L and EPS). This is because the 'loss' due to interest rate increase will then amortise out over the tenor of the bond and, on maturity, will be zero as the bank is repaid in full by uncle Sam. This is probably why analysts don't consider this too much.
5. If interest rates rise, all banks, including BAC, will start to make more money on the NII side of things.
BBob - The L series can be forced into conversion if the stock trades above a certain price for some time, if I recall correctly (and we're quite far from that). Or alternatively holders can convert at a ratio that implies a share price of 50 - 55$ currently. Hence I assume in the article that will not happen for some time (fairly safe assumption, in my view)
K and M: I've excluded them because it's still a few years away. Whether they will convert would depend on the rate levels at the time. Yes it may be a bargain if rates rise, but it may not be. Some of the other issues (e.g. TRUPS) have lower rates still, which is why I drew the distinction between the 10.2bn and 8.6bn there.
Chancer/mphil: I'd like to add that whilst Lewis was a horrible executive (with respect to building companies that can actually work, he utterly failed), it is not only Mozillo (countrywide) but also the law makers in Washington that you should direct your anger to, including those who benefited handsomely from the "Friends of Angelo" programme and then voted on legislation that allowed Countrywide to do what it did. I understand that you are upset about job losses, etc. but so far Moynihan has largely delivered on what he said he would - of course, all holders of stock hope that he keeps that up with the major cost reductions he is targeting ...
MAB, I agree ... and in some ways hope that they tackle common repurchase more proactively. However, assuming that common can only be repurchased again next year after CCAR, it'll very much depend on the price at that time. Another thing to note is that they've exchanged the TRUPS for common, not only for cash and, in that sense, it's dilutive in the year of the issuance, although it may be well worth it long term.
Great - nicely argued why a restaurant may get more value out of OpenTable than just increased traffic and thus why they may want to use the service.
You have, however, failed to provide any justification as to why this would drive additional revenues for OpenTable so as to allow it to eventually justify its lofty valuation. Your argument really only works if Open Table were to be able to extract some of that additional business intelligence value from the restaurants, too. But then, why would the restaurants still buy it if that becomes a meaningful chunk that also goes to OT? (If it's not meaningful, then OT won't justify its valuation).
Most bear cases against OpenTable hinge on the fact that under the current revenue model, they would have to have pretty much every reservation-taking restaurant on the planet as a customer to come to a reasonable PE.