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Avoid the "origination-reliant" bank names ahead of Q1 earnings, says FBR's Paul Miller, as the...

Avoid the "origination-reliant" bank names ahead of Q1 earnings, says FBR's Paul Miller, as the strong mortgage results from the past few reports will likely weaken. Most at risk: BAC, FITB, FBC, USB, STI, and WFC. That mortgage profits have worsened isn't news, but Miller suggests things have gotten worse than previous muted expectations.
Comments (16)
  • JamesChessing21
    , contributor
    Comments (111) | Send Message
     
    I agree there is a lot of hope built into BAC short term, though longer term 2-3 years out am bullish...to turn this juggernaut around will take longer...
    Will retest resistance 11.36 and will likely trade in a range of 11-11.50 during the summer months...
    5 Apr 2013, 12:10 PM Reply Like
  • gwynfryn
    , contributor
    Comments (3886) | Send Message
     
    That would be reasonable, James, but as you state (and can read below) "there is a lot of hope", and it may be enough to prop up the price, at least until the housing bubble pops. It's funny how all these lay-offs are presented as a good thing (as they may be for banks, short term) but who do they think are going to be buying houses at higher prices, when more and more people become fearful about their job status?
    6 Apr 2013, 08:16 AM Reply Like
  • MexCom
    , contributor
    Comments (3050) | Send Message
     
    Wrong wrong wrong! BAC is up as I type this. I added today. It should get back above $12 next week and could never see this low a price again. The mortgage processing comes with a fixed fee percentage dependent on the amount being financed and the values of houses are going up. I bet a 5% increase in home prices would equate to a 5% increase in financing costs to close a loan. They are getting out of the mortgage mess, needing fewer people to maintain the operations. Increased efficiency, increased fees and future prospects for wider rate margins will all boost profits going forward.
    5 Apr 2013, 01:08 PM Reply Like
  • Regarded Solutions
    , contributor
    Comments (15471) | Send Message
     
    No dividends, no support...simple as that.
    5 Apr 2013, 06:15 PM Reply Like
  • Colin Doyle
    , contributor
    Comments (708) | Send Message
     
    You don't really believe that, do you, regarded?

     

    You are away of the repurchase program BAC submitted.
    6 Apr 2013, 04:24 AM Reply Like
  • thor321
    , contributor
    Comments (20) | Send Message
     
    They passed the stress test,survived the Cyperian fiasco and many other headwinds.Don't forget that they're buying back stock. After all that, do you think their earnings report on 4/17 is going crappy? Goodby Shotty Shorts.
    5 Apr 2013, 02:39 PM Reply Like
  • june1234
    , contributor
    Comments (2502) | Send Message
     
    If any of those banks had to report their derivatives exposure on their "stress tests" they'd have a hard time qualifying for a listing on todays Cyprus exchange. Cyprus ain't over If you dont believe that take a look at TBTF stocks since Cyprus, GS and MS alone were down10%. If I've had limited access to my bank account for 6 weeks like they've had come day 1 when they open up for business as usual it ain't 300 euros Im going to be looking to withdraw. They wont open.
    5 Apr 2013, 06:09 PM Reply Like
  • Colin Doyle
    , contributor
    Comments (708) | Send Message
     
    Derivatives are not magical things.
    6 Apr 2013, 04:28 AM Reply Like
  • benitus
    , contributor
    Comments (1898) | Send Message
     
    MexCom.....couldn't agree with you more. The resilience of BAC to downward pressure suggests that there's a lot of underlying support. Now, if things are as bad as the naysayers put it, then where the heck are these support coming from? There'll always be nervous traders in any stock, so when the market is affected in general, then we can't blame these weak nerves from running out (to their own detriment) and playing into the hands of the shorts because I know how they work, as I used to be one of them.

     

    In fact, I was busy two days ago, as otherwise I would've caught the selling pressure and vacated my entire portfolio of BAC to short it big-time because I know it will turn back up again, as the underlying support is rather strong and they will buy up any slack to prop up the price, which is exactly what happened. Since I missed the drop two days ago, I ended up picking up more shares of BAC on the cheap yesterday, which is only half an apple but better than none. This morning, I was prepared for the drop (due to the job numbers) and did a two-way trade, so I was up pretty plenty, thanks to the so-called "bad" news that made the situation favorable for shorting and covering in the same morning.

     

    There's always money to be made from bad news, so long as the underlying support is strong, which is, in the case of BAC. Hence, I say to those undecided about BAC, not to be swayed by the naysayers but stay focussed. Nobody is promising the price of BAC to appreciate drastically within days or weeks but you can trust the fundamentals for BAC that it will be strong enough to carry the price forward into the $20s, hopefully by 2015.
    5 Apr 2013, 02:39 PM Reply Like
  • MexCom
    , contributor
    Comments (3050) | Send Message
     
    I only buy and hold. I have a large "B" warrant position that is mostly at a profit and have started buying the stock in the cash market. I'm selling tech stocks and reinvesting in BAC and utilities. Shorting is too risky and costly. Unless you are working with a large block to offset margin interest at a lower rate, there is not much room on the down side. Better to just sell some at a high point and buy back cheaper. No shorting and havens sake no options!
    5 Apr 2013, 03:57 PM Reply Like
  • benitus
    , contributor
    Comments (1898) | Send Message
     
    MexCom....it's good that you're prudent, unlike many who wish to make quick money by jumping in and out (at the wrong times) and end up losing their shirts. I'm with you, as shorting is indeed risky and sometimes, very costly (if you're slow to respond) but if you trade with sufficient volume and has acquired the ability to move with the instituional traders, you can indeed make a good living, so long as you can resist being greedy. BTW, margin interest is nothing if you use a large broking firm (but for goodness sake, avoid Scottrade, as I used to pay more than $15,000 broking fees in one year and several hundreds every month in margin interest before I realized that I was being ripped off and changed to other firms, so now, I pay peanuts for both).

     

    As for me, I will short if I can read the tea-leaves. If I miss the gun, then I'll wait for the price to settle before picking it up on sufficient dips. If I'm interested in a stock, I watch for at least 3 things, viz. the rate of trades made (up or down), the volume traded and the size of trades, before I make my decision. I'll sit on the sidelines if nothing is definite or positive. You're also right to avoid options, although many people make quick and fast money from trading options with less capital, but you don't hear about the losses. I advise those who're eager to trade options only to do so if they're knowledgeable and competent.
    7 Apr 2013, 12:44 PM Reply Like
  • mphill47
    , contributor
    Comments (486) | Send Message
     
    Deep in the money leaps make sense for BAC. Much more leverage with no more risk than owning the stock.
    7 Apr 2013, 01:02 PM Reply Like
  • bjones54
    , contributor
    Comments (5) | Send Message
     
    I agree. BofA is bound for glory. This recent backslide stems from the Cyprus issues. The whole financial sector took a hit from that. As well, the recent overall market volatility has kept the buyers at bay and the sellers bold.

     

    BofA has spent quite a bit of money and time cleaning itself up, and not just in the litigation following it like a remora fish. It has also been streamlining itself on a regional basis to compete with the smaller banks for the local RE biz. Finally, Mr. Moynihan is doing something constructive with his CEO time. He is turning BofA back into bank.

     

    So, I am closer to Mexcom on this than I am with JamesChessing21.
    5 Apr 2013, 02:46 PM Reply Like
  • june1234
    , contributor
    Comments (2502) | Send Message
     
    JPM today projected today that Wells Fargo mortgage origination revenues would drop from $12B to $8B this year. Same JPM Chase announced a while back they would lay off 19,000 people from their mortgage division going forward through 2014. Realtytrac.com reported a 9% jump in foreclosure filings. Take a look at housing stocks or lumbers futures in this "housing recovery"; trend is what it is
    5 Apr 2013, 05:41 PM Reply Like
  • Phr3d
    , contributor
    Comments (206) | Send Message
     
    Vivec is serving JPM's interests, simple. Laugh at him when Wells' numbers come out, a $4B drop in Origination Fees sounds ominous but was addressed 2 quarters ago.
    <yawn> to Vivec, not worthy of the attention garnered by the headline seekers (and if the numbers do disappoint along the lines of Vivec's prognostication, I'll apologize AND eat my socks, lol).
    8 Apr 2013, 01:59 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (852) | Send Message
     
    Tsk tsk. This isn't rocket science. When rates go up, refinancing dry's up. Banks have to compete to win purchase and refinance business in order to keep their processing pipelines full and they do so by lowering their margins. Mortgage refi's, especially those done through brokers, are very commoditized. Drop your spread 1/8% and you get more than 2 times the correspondent business.

     

    The opposite is also true. When rates drop to a new low, refinancings surge. The bank pipelines can only process so much volume and they raise spreads to cut down the flow.

     

    Rates were up most of the quarter, so refinancing has dried up and banks spreads will have come down. However, they will still be making money. Furthermore, many are still trading below book and their legacy issues are improving significantly thanks to increasing home prices. Additionally recently, Cyprus etc. has caused fear to come back into the market lowering rates. Announced layoffs will shrink pipeline copacity creating less supply. In other words, while Q1 might be weak, it will still be positive, many of the banks are trading below book and Q2 is starting off well.
    9 Apr 2013, 01:55 PM Reply Like
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