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Bank Of America - Oil Contagion Fear Opening Opportunity
- A new factor, the risk of oil contagion, is driving fear across the financial sector and opening opportunity in some stocks.
- The banking sector is usually affected by crisis due to lending throughout the economy, but today's banking sector is better prepared for crisis than ever before thanks to the Fed.
- Bank of America still bears fresh scars from the last financial crisis and has not been taking excessive risks while still under the watchful eye of regulators.
- I expect value to be created for new stakes to be taken in Bank of America before long, but I would wait until after the holidays to take long-term stakes.
- Current long-term holders may want to hedge short-term risk using options or short positions on the XLF security.
3 Reasons Why Bank Of America Is One Of My Top Picks For 2015
- Company fundamentals, a growing jobs market, and the sunsetting of legal issues all could propel Bank of America to meaningful gains in 2015.
- Bank of America currently trades at a 19% discount to its book value whereas competitors like JPMorgan and Wells Fargo trade at above book value.
- The company currently meets Fed capital adequacy requirements including the proposed capital surcharge rules.
- A good year for Bank of America has the potential to lead to further stock buybacks and dividend increases.
- Warren Buffett's Berkshire Hathaway owns 700M equity warrants of Bank of America, which if converted represents 6.6% of Bank of America's outstanding shares.
- Bank of America's share price is still trading at a 17% discount to its book value.
- Bank of America's Projected FY2015 EPS of $1.49 exceeds its combined EPS from 2011 to 2014.
- Bank of America is putting its litigation woes behind it through its numerous charges for litigation.
Bank Of America: Intrinsic Value Approaching $27 Per Share, 50%+ Upside Potential In 2015
- The U.S. economy is showing signs of life with strong job creation data and low unemployment rates.
- Economic tailwinds and a serious undervaluation make Bank of America my favorite bank investment in 2015.
- I estimate Bank of America's intrinsic value to be in the mid $20s, giving shares more than 50% upside potential.
Bank Of America: A Perfect Storm Of Profits Lies Ahead
- The entire banking sector rose after a strong jobs number was reported Friday morning. Bank of America’s stock was up nearly 3% on the day.
- The strong jobs growth coupled with several other positive catalysts on the horizon could make 2015 a very exciting year for the bank.
- Nevertheless, there are always risks to any investment thesis. In the following article we will separate the wheat from the chaff and make a determination.
Bank Of America: Are You Ready For The Next Move To The Upside?
- While business headwinds and risks will always be with us, the most controversial issues have been put to bed.
- The stock has been meandering for several months now.
- The next earnings report is not far off.
- Bank of America is well positioned to for considerable upside in 2015.
- The bank seems to have finally put its litigation risk behind it. This has been well documented over the past month.
- Even so, I believe Bank of America has another major catalyst on the horizon I haven’t seen covered in recent articles.
- This “ace up its sleeve”, so to speak, could mean billions to the bottom line next year for Bank of America. The great news is the ace must be played.
Update: After Moynihan's Commentary, We Still Like Bank Of America
- Bank of America CEO Brian Moynihan has done a great job.
- He recently made statements noting that he would not go down the same path the bank followed in 2008. A bit obvious, but we like it nonetheless.
- We like Bank of America as an investment here.
Bank Of America: Is A Return To Glory In 2015 In The Cards?
- Bank of America has been clawing its way back from the brink since the 2008 crash.
- The company cut the dividend drastically down from $0.64 in the 3rd quarter of 2008 to $0.01 by the 1st quarter of 2009.
- With the bank apparently putting its legacy mortgage woes behind it and EPS expected to rise substantially in 2015, could Bank of America return to glory in 2015?
- Bank of America still trades at a significant discount on a historical and comparative basis.
- A more favorable cost structure coupled with increasing interest rates will generate tremendous income.
- BAC is in the 9th inning of getting out of the mess that was the financial crisis and is poised for success.
Bank Of America: Fasten Your Seat Belt And Prepare For Takeoff
- Bank Of America has panoply of positive catalysts on the horizon.
- These catalysts combined with the bank putting its mortgage litigation woes behind it should spur the stock higher.
- Even so, headwinds remain. Nevertheless, with the Republicans taking control of the Senate, is the worm finally about to turn?
- A review of critical investment points which demonstrate why Bank of America is not ideal for income investors.
- Capital could be best deployed in other higher dividend yielding North American banks.
- Review of JP Morgan Chase and Toronto Dominion Bank of Canada.
Bank Of America: An Investment That Cannot Lose, Maybe
- The trials and tribulations of BAC are well documented and fading into the past.
- If Bank of America simply plays by the rules and works like a bank should, I cannot see how investors can lose. Of course, that is a big "if".
- The business of money is like any other business, only better.
Bank Of America: That Which Does Not Kill Us Makes Us Stronger
- Bank of America was nearly driven into bankruptcy by litigation expenses due to the 2008 housing debacle.
- Nonetheless, the bank managed to survive and litigation risk is now clearly in the rear view mirror.
- Ironically, an uptick in recent mortgage activity may be just the thing to propel Bank of America shares higher.
- Bank of America’s performance for the quarter was overshadowed by their $16.7 billion settlement with the Justice Department.
- Revenues for the quarter amounted to $21.2 billion, which was a 5.8% increase over the previous year.
- The bank was able to achieve broad based growth in profitability over the quarter.
- Dividends grew over the previous quarter and year, highlighting the bank’s desire to reward its investors.
- Bank of America has established its prowess this quarter as a competitor in the banking industry.
- Bank of America’s stock has been deluged by a significant number of headwinds over the past few months.
- The major issue at hand was the overhang of litigation risk.
- With litigation risk seemingly in the rear view mirror and a potential catalyst on the horizon, is it time to start a position?
BAC: Best Practice Model Validation For Fed Stress-Testing, Value At Risk And Credit VAR
- Last Friday the Fed decried banks' reliance on poor risk models in announcing the rules for the imminent stress testing exercise with results due in January.
- These stress tests have important implications for BAC, C, JPM and WFC and the banks regulated by the European Central Bank and UK authorities.
- This note, which is designed for serious nerds, focuses on best practice model validation for stress testing, value at risk, and credit-adjusted value at risk.
Bank Of America: Selling Into Market Weakness Is Never A Good Idea
- Bank of America just released third quarter earnings, which were solid (with the exception of CRES).
- Investors sold off Bank of America in light of a weaker stock market, not because results were bad.
- Bank of America is oversold at the moment and the 4.6% decline yesterday makes no sense at all.
- With settlements in the rearview mirror, Bank of America is an interesting Buy at a 25% discount to book value.
Bank Of America - No Surprises, Operational Improvements And Multi-Billion Legal Fees
- Bank of America posts relatively solid third quarter results adjusted for one-time items.
- Following multi-billion legal charges the company is essentially breaking even.
- I remain very cautious given the troubled past and continued legal expenses, while operational achievements are really visible.
Wed, Dec. 17, 4:30 PM
- To review, current global head of FICC David Sobotka - comfortable with the progress the struggling business has made - reportedly set a retirement date for year's end.
- He's to be replaced - reports the WSJ - by Bernard Mensah and James DeMare. Demare has been with BAC since 2008 and is currently head of global securitized products and real estate portfolio management. He'll continue to be based out of NYC.
- Mensah joined BofA in 2010, and currently runs FICC trading for EMEA. He'll continue to be based in London.
- Amid a tough time for FICC action in the banking industry, Bank of America managed to post an 11% Y/Y gain in Q3, though CEO Brian Moynihan has said Q4 isn't looking anywhere near as robust.
Wed, Dec. 17, 3:23 PM
- This time its the National Credit Union Administration Board, and it's suing Bank of America (NYSE:BAC) and U.S. Bancorp (NYSE:USB) over losses on $5.8B in MBS.
- "Even after ample evidence came to light that the trusts were riddled with defective loans, defendants shut their eyes to such problems,” according to the complaint. “As participants in many roles in the securitization process, defendants were economically intertwined with the parties they were supposed to police.”
Wed, Dec. 17, 7:36 AM
- Jefferies yesterday posted a 73% plunge in fixed-income trading revenue for the quarter ended Nov. 30, and a 45% fall in equity-trading revenue. “You’re going to see weaker trading results because of what I’d call bad volatility,” says Charles Peabody, as firms cut back on stock and bond offerings.
- That Q4 trading revenue is going to be a weak one for the likes of JPM, C, BAC, GS, and MS shouldn't be a major surprise as Ciit's Mike Corbat, BofA's Brian Moynihan, and JPM's Marianne Lake said as much when presenting at a financial services conference earlier this month. But the weakness they described is nowhere near what was reported at Jefferies.
- Alongside the weak trading results, Jefferies is also looking to get rid of Bache - its commodities-trading business. "The fact that they are throwing in the towel on this business just a few years in would suggest that maybe that opportunity is not nearly as robust as they thought it would be,” says UBS's Brennan Hawken.
- Previously: Jefferies posts loss, mulling sale of Bache unit (Dec. 16, 2014)
Thu, Dec. 11, 9:20 AM
- SolarCity (NASDAQ:SCTY) has partnered with BofA Merrill Lynch (NYSE:BAC) to form a new investment program for financing an estimated $400M in solar power projects in 2014 and 2015.
- The new residential program follows BofA Merrill's prior commitment to finance more than $200M in commercial solar power projects with SolarCity, and is part of BofA's current 10-year, $50B environmental business goal to advance lower-carbon economic solutions.
- SCTY +0.5%, BAC +0.6% premarket
Tue, Dec. 9, 2:12 PM
- "My feeling is that if a bank has proper reserves and it’s trading well below tangible book value, that is an undervalued bank," Mohnish Pabrai tells Barron's, quickly summing up the investment case for two of his holdings, Bank of America (BAC -1.1%) and Citigroup (C -1.1%). "You could shut down a bank today and if the reserves are correct you would get back the tangible book value."
- Both are trading a lot closer to book (or even above) then they were when he first invested, but Pabrai considers them still undervalued and expects they'll eventually trade more inline with the higher P/B and P/E multiples of Wells Fargo and JPMorgan.
- Of his $700M AUM fund which has outperformed the S&P by about 150 basis points annually over the last decade, the Buffett disciple Pabrai keeps fees down thanks to low overhead - he's the sole analyst and portfolio manager.
Tue, Dec. 9, 8:47 AM
- Already under pressure amid a sizable global selloff, Bank of America (NYSE:BAC) is now lower by 2.7% premarket after CEO Brian Moynihan, presenting at the Goldman Sachs financial services conference - warns Q4 trading revenue will fall both from Q3 and versus one year ago.
- There's been a lot of talk about higher interest rates, but they remain low, and Moynihan reminds of that negative impact to NII.
- Presentation slides
Mon, Dec. 8, 10:28 AM
- A combination of new regulations and near-zero interest rates has some banks - including JPMorgan (NYSE:JPM), Citigroup (NYSE:C), HSBC, Deutsche Bank (NYSE:DB), and Bank of America (NYSE:BAC) - privately telling larger clients to take their deposits elsewhere or face fees on accounts which have long been free.
- “Ultimately my balances aren’t as profitable for the banks, and that’s going to impact my business,” says an executive with a title insurance company, complaining of sleepless nights amid negotiations with his bankers.
- BNY Mellon (NYSE:BK) has begun charging institutional clients money to park money in euros, and State Street (NYSE:STT) says itwill soon begin doing so.
- Some bankers are advising large clients to break up large deposits across a number of lenders (including smaller banks not subject to the new regulations), and other corporations are going to find themselves needing to build more sophisticated (and riskier) portfolios likely including vehicles like short-term bond funds and uninsured money-market funds.
Fri, Dec. 5, 10:06 AM
- Among those counting on higher interest rates to boost profits are banks, insurers, and online brokers, and all are outliers to the upside in today's session after a strong November jobs report has rate hike expectations on the rise. The XLF is up 1%.
- TBTFs: Bank of America (BAC +2.1%), Citigroup (C +1.8%), JPMorgan (JPM +2.2%), Wells Fargo (WFC +1.2%)
- Regionals (KRE +1.9%): Regions Financial (RF +2.6%), KeyCorp (KEY +2.3%), Huntington (HBAN +1.5%), BB&T (BBT +1.6%), Zions (ZION +4%)
- Custodials: BNY Mellon (BNY), State Street (STT +1.6%), Northern Trust (NTRS +1.8%)
- Life insurers: MetLife (MET +2.1%), Prudential (PRU +2.5%), Lincoln National (LNC +2.3%)
- Online brokers: Schwab (SCHW +3.8%), E*Trade (ETFC +3%), Ameritrade (AMTD +2.7%)
- Previously: Short end of yield curve on the move after jobs number (Dec. 5, 2014)
- Previously: Bonds and dollar higher, gold slumps after strong jobs report (Dec. 5, 2014)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, IAI, SEF, IYG, IAK, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, RWW, KBWR, RYF, KBWP, KBWI, PSCF, FINZ, KRS
Tue, Dec. 2, 3:42 PM
- "Our concern is that the market has become complacent on the setting of the SIFI surcharge for the mega banks, which means there may be surprise at just how onerous the surcharge could be for JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS)," writes Guggenheim's Jaret Seiberg.
- The Fed is expected to announce the capital surcharge on December 9.
- Previously: U.S. banks to be hit with tougher capital rule
Mon, Dec. 1, 11:40 AM
- A positive macro outlook for the U.S. (especially compared to the rest of the globe) should boost credit demand, says UBS - upgrading U.S. financials (NYSEARCA:XLF) to Overweight - while the start of a new rate-hike cycle next year bodes well for interest margins.
- UBS's three favored U.S. banks are Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Morgan Stanley (NYSE:MS), but TD Bank (NYSE:TD) also makes the buy list thanks to its large American presence.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, RWW, KBWR, RYF, FINZ, KRS
Sat, Nov. 29, 8:00 AM
- New guidelines - set to take full effect on December 1 - are the result of an agreement reached last month between banks and the GSEs meant to clarify exactly when lenders could be called to task for mortgages sold to Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) which ultimately default. Since the financial crisis, Fannie and Freddie have forced banks to repurchase billions of dollars worth of mortgages, leaving them naturally gun-shy about making new loans to all but the most pristine of credits.
- “It’s providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” says Mike Heid, president of Wells Fargo (NYSE:WFC) Home Mortgage. Along with SunTrust (NYSE:STI), Wells says borrowers should begin to see initial changes - such as faster processing times, reduced credit score requirements, and greater leeway to those whose credit history suffered due to one-time events - in a few weeks.
- "We will be able to be looser and open up the net wider," says Mason-McDuffie Mortgage CEO Bill Godfrey, now expecting to make loans down to a 620 credit score from 660 previously.
- Not everyone agrees: “Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times…we are simply going to stay on the sidelines," U.S. Bancorp (NYSE:USB) boss Richard Davis has said, and Bank of America (NYSE:BAC) CEO Brian Moynihan made similar comments at a recent conference.
Wed, Nov. 26, 11:50 AM
- At issue was a SEC case against Bank of America (NYSE:BAC) mostly for mortgage-related wrongdoing by Merrill Lynch and Countrywide before the bank purchased the two. In this case, BofA will disgorge $109.2M in profit, $6.62M in interest, and pay a civil penalty of $109.2M.
- The clearing of this case will allow the $16.7B global mortgage settlement to move forward.
Mon, Nov. 17, 11:05 AM
- The two cases both come from Florida and involve so-called "stripping off," where a homeowner in a Chapter 7 bankruptcy filing can void second mortgage debt when the first mortgage is greater than a home's value.
- An appeals court allowed the practice, but Bank of America (NYSE:BAC) says the approach taken by the court is different than that of other appeals courts around the country and thousands of pending cases could be affected.
Thu, Nov. 13, 10:17 AM
- Real sweethearts if you believe the reports, the likes of JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Synchrony Financial (NYSE:SYF) are being investigated by the Feds for still going after borrowers after their debt has been legally discharged in a bankruptcy.
- Paying little attention to such court-ordered discharges, the banks reportedly are keeping the debt alive on credit reports, more or less attempting to force borrowers to pay on bills which they no longer owe.
- The issue, say sources, is the way banks report to credit agencies. Once a debt is voided through bankruptcy, creditors must update credit reports showing that debt is cleared. Banks, however, routinely fail to do so, instead leaving notations of "past due" or "charged off." A clerical mistake would be one thing, but, according to a number of bankruptcy judges,, banks refuse to make corrections unless the borrower pays.
- The banks contend they are complying with all federal laws in their collection and sale of debt. Class-action suits have also been filed and the banks are trying to have them thrown out, arguing its third-party debt buyers who are in control.
Wed, Nov. 12, 1:02 PM
- The FHFA wants to ease lending standards - allowing down payments of as little as 3% - but Bank of America (NYSE:BAC) won't be playing along, says CEO Brian Moynihan, speaking at a BAML conference.
- Webcast replay
- "I don't think there's a big incentive for us to start to try to create more mortgage availability where the customers are susceptible to default," he says, and those who can't come up with at least a 10% down payment should probably consider remaining as renters. "You won't see us start to expand our criteria much past what we've done today."
- Given the shell-shock from the unceasing legal assault and put-back demands, can BofA or any other lender be blamed?
Wed, Nov. 12, 10:32 AM
- In what appears to be in addition to the already-announced global $3.4B fine for banks over forex manipulation, the OCC announces $950M in penalties against Bank of America (BAC -0.6%), JPMorgan (JPM -1.1%), and Citigroup (C -0.7%) for "unsafe or unsound" practices related to their forex trading operations.
- BofA will pay $250M, JPM $350M, and Citi $350M.
- Previously: Global banks fined $3.4B in forex probe
BAC vs. ETF Alternatives
Bank of America Corporation is a bank holding and a financial holding company. Through its subsidiaries, it provides banking and non-banking financial services and products throughout the United States and in selected international markets.
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