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Dec. 16, 2015, 10:08 AM
- Ahead of the Fed's expected rate hike later today, analyst Matt O'Connor reiterates his bullishness on Bank of America (BAC +0.5%).
- "While we are not convinced a material pick up in the economy is likely anytime soon, we believe [BofA] offers good upside optionality to this without having to pay for it," says O'Connor, noting the stock's low relative valuation.
- He's also impressed with the bank's focus on being the low-cost provider within the mass market for consumers, and for credit cards. The bank's earnings should be less volatile than that of peers as it's cut risk in its loan portfolio and exposure to sales and trading.
Dec. 14, 2015, 3:32 PM
- The troubles in credit mean investors need to discount those costs against the benefits of higher rates, say David George and team at Baird. In other words, downside risk to 2016/2017 EPS estimates arises not just from net interest margin compression, but also higher loan costs.
- Three picks from the team: Bank of America (NYSE:BAC) at 1.1x tangible book value vs. peers at 1.35x. The $18 price target assumes just 1.05x book given weaker returns on capital and revenue growth visibility. BB&T (NYSE:BBT) trades at 11.5x 2016 estimated EPS - inline with peers, but BB&T's solid pre-provision returns, competitive positioning, and better relative capital deployment opportunities warrant a premium valuation. JPMorgan (NYSE:JPM) is also trading about inline with peers through it too has better relative returns and growth opportunities.
Dec. 10, 2015, 1:12 PM
- Raymond James (NYSE:RJF), Bank of New York Mellon (NYSE:BK), Northern Trust (NASDAQ:NTRS), and Bank of America (NYSE:BAC) are best-positioned in the event of a one-and-done move from the Fed, says Goldman, as they get most the earnings upside from the initial move higher in rates, rather than needing "normalization."
- "Deposit betas" may be a source of underappreciated surprise, says Goldman, which doesn't believe banks will pass along much of the initial 50 basis point hike in rates to customers. Poised to benefit here: JPMorgan (NYSE:JPM), BofA, Wells Fargo (NYSE:WFC), PNC Financial (NYSE:PNC), and E*Trade (NASDAQ:ETFC).
- Finally, clarity on the interest rate picture should allow bank managements to get moving in growing returns, Favored "self-help" stories: AIG, Ally Financial (NYSE:ALLY), Oaktree Capital (NYSE:OAK), Voya Financial (NYSE:VOYA), and Zions Bancorp (NASDAQ:ZION).
Dec. 10, 2015, 9:27 AM
- The Fed back in March after the CCAR had asked Bank of America (NYSE:BAC) to resubmit its capital plan to address certain deficiencies in capital planning processes. The bank, says the Fed, has made progress in fixing the issues, but must continue to show demonstrable advances prior to the 2016 CCAR.
- Previously: Fed review finds shortcomings in its handling of stress tests (Dec. 5)
Dec. 9, 2015, 11:16 AM
- While trading results are expected to decline sequentially in Q4, it's inline with the typical seasonality seen at this time of year, says Bank of America (BAC +0.1%) CEO Brian Moynihan, speaking at an investor conference.
- “There’s nothing new here - the fourth quarter is always quieter ... Do we wish there were more activity? Yeah."
- Maybe more important is the year-over-year results, and Moynihan expects that to be up in the mid-single digits (though coming against a particularly weak Q4 in 2014).
Dec. 9, 2015, 4:10 AM
- Some of the world's largest companies, including Unilever (NYSE:UL), Total (NYSE:TOT), Bank of America, (NYSE:BAC), Patagonia and Ikea, announced their commitment on Tuesday to cutting carbon emissions and participating in practices that would support sustainable energy.
- The pledges came at The New York Times Energy for Tomorrow conference, being held in concurrence with the international climate talks outside Paris.
- "We are not going to solve this at government level," said Secretary of State John Kerry, speaking to an audience at the American ambassador’s Paris residence on the eve of the conference. "You are going to make the difference."
Dec. 5, 2015, 9:23 AM
- Key to the issues are the computer models the central bank uses to simulate how banks might perform during a recession. The results spewed out by these programs effectively determine the level of dividends and buybacks of the nation's large banks (not to mention the career path of bank managers).
- Source: WSJ
- Internal reviews found shortcomings in the Fed's system for double-checking the models - too few staff, too heavy reliance on certain key personnel, and lacking clear procedures and policies about certain aspects of the validation process. “Similar findings identified at institutions supervised by the Federal Reserve have typically been characterized as matters requiring immediate attention," according to the report.
- In response, the Fed has done what most bureaucracies do - hired more staff and created a supervisory committee. Nevertheless, the findings of the reviews are likely to add fuel to calls from bankers and lawmakers for the central bank to open up the "black box" of its stress-testing models.
- Among the interested parties are Citigroup (NYSE:C), which failed a stress test, and Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan (NYSE:JPM) - all of whom have had their issues.
Dec. 4, 2015, 10:46 AM
- So-called inventory-financing deals - otherwise known as traditional banking - are on the rise. We're replacing market risk with credit risk, says Goldman's (NYSE:GS) Gregory Agran, global-co-head of commodity trading.
- Whereas before Goldman and others might have had a relatively small group placing wagers on the direction of commodities, they now have a far larger group working on making loans. It makes for a sizable drop in profit margins - these new deals have returns as low as 2 % - but doesn't run afoul of new bank regulations.
- Joining Goldman in moving to expand inventory-financing are JPMorgan (NYSE:JPM), Citigroup (NYSE:C), and Bank of America (NYSE:BAC).
Dec. 3, 2015, 2:24 AM
- Eight of the biggest U.S. banks have been downgraded by Standard & Poor's, following a rule approved by the Fed in October that will require large institutions to hold a stockpile of debt that can be converted into equity if they falter.
- "We now consider the likelihood that the U.S. government would provide extraordinary support to its banking system to be uncertain," S&P said in the statement.
- Firms affected include JPMorgan (NYSE:JPM), BofA (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BNY Mellon (NYSE:BK) and State Street (NYSE:STT).
Nov. 17, 2015, 4:36 PM
- "I call them aggravators," says PNC Financial (NYSE:PNC) CEO Bill Demchak, asked at a conference about restricting access to data aggregators like Mint.com, Quicken, and Digit.co. "We don't know how well they are protected," says Demchak, talking about the security of the apps. "They slow down service to the rest of our accounts, and we react to that."
- Demchak then turned the question over to Bank of America (NYSE:BAC) CEO Brian Moynihan who was seated next to him" "There's a safety and soundness issue," says Moynihan. "There's a risk."
- Previously: WSJ: BofA joined those cutting off finance sites from its data (Nov. 10)
Nov. 17, 2015, 9:21 AM
- For what is now the fifth consecutive year, Bank of America (NYSE:BAC) ranks last among large U.S. banks in customer satisfaction, according to the American Customer Satisfaction Index.
- BofA had 68 points (down from 69 a year ago) versus Wells Fargo with 75, Citibank at 73, and Chase at 71. The overall average score for banks (with smaller players included) was 76.
- The outfit doesn't give a specific reason for BofA's weaker performance, but the bank has been aggressive in embracing the mobile revolution - shedding branches, eliminating drive-up services, and automating as much as possible of what's left.
- In other news, Soros Fund Management reports (as of 9/30) owning call options in BofA controlling nearly 1M shares.
Nov. 12, 2015, 12:56 PM
- As floated last week, Bank of America (BAC -1.4%) picks outgoing Ford Motor General Counsel David Leitch as its new global general counsel, effective Jan. 1.
- Lietch replaces Gary Lynch who is now vice chairman at the bank after spending the last four years inundated with the bank's numerous crisis-related legal issues.
- Previously: WSJ: BofA set to name new general counsel (Nov. 4)
Nov. 10, 2015, 9:43 AM
- "This is a shot across the bow from banks," says Pinnacle Advisory's Michael Kitces. At issue are popular aggregator sites - think Mint.com, Quicken (NASDAQ:INTU), Digit.co - which allow consumers to monitor all of their financial relationships in one place.
- JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) in recent months have also disrupted the data flow to these operators, according to the WSJ. Bank of America (NYSE:BAC), reports the Journal, took action in July, with at least two aggregators being shut out.
- Naturally trying to protect their turf, banks are also concerned the aggregator sites could threaten account security (they often require bank-account passwords be turned over). Fifth Third Bancorp (NASDAQ:FITB), Capital One (NYSE:COF), and JPMorgan are among those warning customers against sharing information with third parties.
Nov. 9, 2015, 4:24 AM
- The Financial Stability Board has published new rules that aim to stop banks from becoming "too big to fail," confirming its final proposals for Total Loss Absorbing Capacity, or TLAC.
- Under the plan, large lenders will have by January 2019 to hold a financial cushion of at least 16% of their risk-weighted assets in equity and debt that can be written off. That requirement will gradually increase, reaching 18% of assets weighted by risk by January 2022.
- The FSB will put the rules, which will apply to the world's top 30 banks, to the G20 later this month.
Nov. 6, 2015, 10:04 AM
- The major averages are lower following the blowout jobs number, but the financial sector (XLF +1%) is charging ahead, enthused at what appears to finally be the near-certain prospect of higher interest rates.
- Short-term interest rate futures are pricing in about a 75% chance of a rate hike next month, and the 10-year Treasury yield is up nine basis points to 2.32%. The two-year yield has soared all the way to 0.90% - its highest level in more than five years.
- The green in this yield-starved sector is everywhere: Bank of America (BAC +3.5%), Citigroup (C +3.4%), U.S. Bancorp (USB +2.8%), Regions Financial (RF +3.7%), PNC Financial (PNC +2.4%), Capital One (COF +1.4%), Bank of New York Mellon (BK +1.9%), E*Trade (ETFC +3.5%), Schwab (SCHW +5.1%), Interactive Brokers (IBKR +3.4%), MetLife (MET +3.2%), Prudential (PRU +3.6%).
- Previously: Big beat on jobs number (Nov. 6)
- Previously: December rate hike back on after big jobs number (Nov. 6)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, KIE, IAT, SEF, IYG, IAK, FXO, FNCL, KBWB, QABA, FINU, KRU, KBWR, RWW, RYF, KBWP, KBWI, FINZ, KRS, XLFS
Nov. 4, 2015, 3:40 PM
- "This transaction is consistent with Bank of America’s (NYSE:BAC) ongoing efforts to simplify its business, in this instance, by outsourcing certain product manufacturing functions to an industry leader," says a bank spokesperson following yesterday's deal to sell its $87B AUM money-market business to BlackRock (NYSE:BLK).
- While ZIRP has crimped the profitability of money-market funds, the deal could wind up being a sweet one for BlackRock should rates rise, and the boosted size (AUM will rise to $372B from $285B) should bring needed efficiencies if rates don't move. "It's a challenge managing cash in a low interest-rate environment, so we have to be highly efficient," says Tom Callahan, co-head of global cash management. BlackRock will leapfrog JPMorgan to become the #2 money market fund family after the deal closes next year (Fidelity is #1).
- Terms were not disclosed.
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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