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The 30 bp decline in Bank of America's (BAC) net interest margin represents $1.27B in lost...

The 30 bp decline in Bank of America's (BAC) net interest margin represents $1.27B in lost quarterly earnings power, says Josh Steiner, a "hit (that) is recurring, not one time." This deterioration in bank's underlying business may help explain the sharp decline in the stock (-4% today,  -4.8% yesterday) despite a headline beat on earnings thanks to a large reserve release.
Comments (8)
  • bbro
    , contributor
    Comments (9597) | Send Message
     
    BAC has plenty of capital...plenty of liquidity..lousy revenues...which
    means expenses must come down and that will take time.
    19 Jul 2012, 01:39 PM Reply Like
  • rdullom
    , contributor
    Comments (16) | Send Message
     
    As implied, NIM could continue to shrink, particularly if rates stay flat or decline further and economic growth continues to slow or actually declines. If economic growth never recovers, then we have much larger problems to concern ourselves with, like what will we do for food. I assume that at some point over the next few years economic growth will begin to recover and thus interest rates will begin to rise. Given this, the NIM will begin to improve. The question is one of timing and it should be obvious from my remarks that I do not believe in market timing or in forecasts for the economy. Years of experience has taught me that even well educated economists cannot predict more than a few months out with any degree of accuracy.
    20 Jul 2012, 12:29 PM Reply Like
  • rdullom
    , contributor
    Comments (16) | Send Message
     
    This is a short term view of earnings. Yes, they lose this as higher earning assets run off, but rates won't continue down forever. When rates begin to rise, hihger earning assets will be added which will help to raise the NIM. Also, BAC is shrinking their debt, which also reduces assets and earning power.
    19 Jul 2012, 01:55 PM Reply Like
  • markjones12
    , contributor
    Comments (24) | Send Message
     
    to rdullom: what happens if NIM continue to shrink? Growth is slowing, no reason to believe that this spread will recover soon.
    19 Jul 2012, 03:00 PM Reply Like
  • nafar
    , contributor
    Comments (218) | Send Message
     
    So long as GDP is growing, there is very little chance that total revenue of banking sector would decrease. No new competitor are entering in this sector. What would happen that financial institutions in poor shape may wither away and providing their business to stronger banks. So I dont see any reduction in profitability or revenue of stronger banks.
    19 Jul 2012, 03:25 PM Reply Like
  • bitsnpieces
    , contributor
    Comment (1) | Send Message
     
    I agree with rdullom. BAC have taken steps to improve the business, which has reduced assets and earning power but should make it fundamentally healthier and stronger on its feet. In the long run, I believe BAC should come out stronger. Managing quarter-to-quarter is inappropriate for a company that's trying to turn itself around. Wonder if Berkshire would pick up more stock on the back of this decline....
    19 Jul 2012, 04:01 PM Reply Like
  • Alex S. Gabor
    , contributor
    Comments (224) | Send Message
     
    BAC launders mexican drug cartel money and some of the biggest stockholders are engaged in global money laundering. If you were caught doing that you would be put in jail so why is bank of america allowed to continue to exist or stay in business? Ignorance or regulators looking the other way. Just think how sad hundreds of thousands of people would be if Bank of America just vanished over night just like Washington Mutual. Who would replace BAC? The FED?
    19 Jul 2012, 04:11 PM Reply Like
  • MexCom
    , contributor
    Comments (3051) | Send Message
     
    The bank continues to make money and the fear of bankruptcy is now fading as a worry. They are getting stronger, and should continue this improving trend. I added to my Warrant position during this decline.
    19 Jul 2012, 04:37 PM Reply Like
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