Bank Of America: Diamonds Are Forever
Fairlight Capital • 107 Comments
Fairlight Capital • 107 Comments
Tue, Apr. 5, 10:05 AM
- In a research note to clients, Goldman noted that investors typically over-penalize declining profitability. To wit, the S&P 500 currently trades slightly above its 2014 year-end level of 2,059, but its P/B ratio is 4% lower at 2.7x.
- Goldman recommends clients consider the following stocks with low P/B ratios:
- AIG - P/B of 0.73, implied upside 22%.
- BAC - P/B of 0.89, implied upside 26%.
- C - P/B of 0.7, implied upside 25%.
- CFG - P/B of 0.89, implied upside 24%.
- HES - P/B of 0.8, implied upside 29%.
- LNC - P/B of 0.92, implied upside 17%.
- RF - P/B of 0.96, implied upside 34%.
- ZION - P/B of 0.88, implied upside 24%.
- Now read Best-Performing Value Strategies: The Price-To-Book Ratio »
Mon, Apr. 4, 4:24 PM
- Bank of America (NYSE:BAC) leads the league in fumbling stress-test submissions - three in last five years - but this year, the lender is tasking its own Winston Wolfe with tackling the job.
- “She’s pretty much fearless," says former Ken Lewis executive Steele Alphin of Chief Administrative Officer Andrea Smith. "I asked her to do things that were very, very difficult to do."
- Regulators have told the bank of their concern with excessive turnover in recent years of those running the test, and that the bank needs to stop viewing the CCAR as a once-a-year exercise, rather than part of a bigger-picture capital management effort. Part of Smith's job, writes Christina Rexrode, is to alleviate those concerns.
- Her job leading this task is of particular interest given her human resources background. Executives at other lenders running the test typically come out of finance or risk.
- "It’s kind of like an orchestra leader,” says COO Thomas Montag. "I have no idea if the orchestra leader can play any of the instruments, but if you don’t have somebody at the front providing the timing and the direction and the focus, it sounds kind of lousy.”
- Now read: Bank Of America And Citigroup: Which Is The Better Investment? (Part I: Capital)
Mon, Apr. 4, 7:28 AM
- March monthly performance was: +4.86%
- 52-week performance vs. the S&P 500 is: -9%
- $0.04 in dividends were paid in March
- Top 10 Holdings as of 12/31/2015: JPMorgan Chase & Co (JPM): 3.18%, Citigroup Inc (C): 3.13%, General Electric Co (GE): 2.46%, US Treasury Note 1.625%, Bank of America Corporation (BAC): 1.94%, Morgan Stanley (MS): 1.58%, US Treasury Note 2.25%, Carnival Corp (CCL): 1.3%, PNC Financial Services Group Inc (PNC): 1.26%, Citizens Financial Group Inc (CFG): 1.26%
Thu, Mar. 31, 12:24 PM
- With everybody expecting continued capital markets weakness and additional energy-related loan loss reserve builds, it may not take much positive news - better than hoped top line growth, efficiency gains, limited credit deterioration - to send bank stocks higher, say Credit Suisse's Susan Katzke and team.
- There's also the chance of numbers dampening sentiment even further, they say, as perhaps results turn out even worse than the current low expectations.
- The team continues to favor Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), and Wells Fargo (NYSE:WFC) among the large caps.
- Now read: Bank Of America: To Buy Or Not To Buy (March 31)
Wed, Mar. 30, 9:28 AM
- Co-head of global FICC at BAML (NYSE:BAC), Bryan Weadock is going on leave, reports Business Insider, citing an internal memo.
- Weadock's co-head Sanaz Zaimi will become sole chief on an interim basis. Previously head of cross asset solutions and strategies, Karen Fang will lead Americas FICC.
- Weadock's so far temporary exit continues a period of change at Bank of America's markets operation, and comes as Q1 looks to be another rough trading quarter for Wall Street banks.
Wed, Mar. 30, 8:49 AM
- We can use the term here, but Bank of America (NYSE:BAC) has reportedly banned its staff from mentioning "Brexit" in the run-up to the U.K. June referendum.
- The move marks a change for the bank which previously supported the anti-Brexit forces. It also marks a break from most other large banks which naturally are warning of mutually assured destruction should the U.K. exit the EU.
- Might the bank be trying to get ahead of what it expects will be a U.K. vote to leave?
- ETFs: FXB, EWU, GBB, EWUS, DXPS, FKU, DBUK, QGBR, HEWU
Tue, Mar. 29, 2:49 PM
- Not joining the broad market rally following Janet Yellen's caution on the pace of rate hikes are the financials (XLF -0.2%), where any earnings growth will depend, in part, on higher interest rates.
- The S&P 500 is higher by 0.85% and Nasdaq by 1.7%, but Bank of America (BAC -2.2%), Citigroup (C -1%), Wells Fargo (WFC -1.5%), Regions Financial (RF -2.1%), KeyCorp (KEY -1.8%), Fifth Third (FITB -2.1%), MetLife (MET -1.2%), and Prudential (PRU -0.8%) are among those under pressure.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, SEF, FNCL, FXO, RYF, FINU, RWW, FINZ, XLFS
- Previously: Stocks and gold turn higher, yields and dollar lower, on Yellen remarks (March 29)
- Previously: Yellen signals caution on rate hikes (March 29)
Thu, Mar. 24, 7:08 AM
- In an effort to cut expenses, the bank's Japanese brokerage unit plans to reduce its office space in Tokyo this year, reports Bloomberg, which says Merrill Lynch Japan Securities - which rents six floors of the Nihonbashi 1-chome Mitsui Building - will vacate one level later this year.
- The operation posted a loss of ¥6.9B last year thanks to one-time expenses. It had a profit of ¥7.3B in 2014. Headcount of 769 is down from 842 two years ago.
- BofA (NYSE:BAC) ranked fourth among Japanese M&A advisers in 2015, up from 17th a year earlier. Among equity underwriters, it slipped to 11th from 7th.
Tue, Mar. 22, 12:33 PM
- Return on average common equity (ROACE) is what determines the valuation of large, mature banks, says RBC's Gerard Cassidy, and those banks that cannot earn their cost of equity capital - estimated at 9-10% through the cycle - ought to consider alternative strategies, including breaking up.
- The key here is interest rates, and should they remain at these levels for a prolonged period, reaching targeted ROACE will be difficult for all banks, particularly for Bank of America (NYSE:BAC) and Citigroup (NYSE:C).
- While a sum-of-the-parts analysis indicates value could be unlocked, the cost of doing so could be prohibitive, says Cassidy.
- Long-term investors planning on holding through the cycle are better off with Wells Fargo (NYSE:WFC) and JPMorgan (NYSE:JPM), but active investors managing their portfolios more aggressively might consider BofA and Citi.
Fri, Mar. 18, 7:47 AM
- This new $800M is in addition to the $4B plan announced one year ago. Bank of America (NYSE:BAC) notes rules allow banks to add capital returns not exceeding 1% of tier one capital as long as the Fed is notified and does not object.
- Source: SEC Form 8-K
- Shares +0.8% premarket
- Previously: JPMorgan adds $1.88B to buyback (March 17)
Thu, Mar. 17, 3:17 PM
- Bank of America (NYSE:BAC) director Chad Gifford, aged 73, is retiring from the board after 12 years. Gifford joined the board in 2004 after the bank's purchase of FleetBoston, of which he was CEO (and where Brian Moynihan was once an executive).
- He had been expected to retire a year ago, but BofA convinced him to stay. His exit will leave just Thomas May and Moynihan as the only board members with Fleet ties.
- This all occurs following an unsuccessful attempt last year by shareholders to separate the CEO and chairman roles.
Wed, Mar. 16, 2:28 PM
- Rallying hard for the last few weeks alongside the markets and hope for a faster pace of rate hikes, the financials (XLF -0.4%) are the worst-performing sector in the minutes after the FOMC's dovish statement and economic/rate projections.
- Bank of America (BAC -2.6%), Morgan Stanley (MS -1.9%), Wells Fargo (WFC -0.9%), Citigroup (C -1.4%), Regions (RF -1.7%), PNC (PNC -1.2%), Fifth Third (FITB -1.9%), Schwab (SCHW -2.5%), MetLife (MET -0.4%)
- Previously: Stocks, bonds, gold gain, dollar slides, following Fed (March 16)
- Previously: Fed bows to markets (March 16)
- Previously: Fed stays on hold, sees just two rate hikes this year (March 16)
Tue, Mar. 15, 8:45 AM
- "Our overall Q1 results reflect an exceptionally volatile and turbulent market environment during our first fiscal quarter," says Jefferies (NYSE:LUK) CEO Richard Handler. "A quiet December was followed by an extremely challenging January and first few weeks of February."
- The investment bank posted a loss of $166.8M in Q1 vs. a profit of $12.9M a year ago. Revenue of $299M fell a full 49%, led by an 82% plunge in trading revenue to $58.8M. Of this, fixed-income revenue fell to $56.8M from $126M. Equity trading revenue fell to just $1.7M from $203.5M thanks to markdowns on two equity block trades.
- Good times ahead: Not only have markets stabilized, says management, they've "aggressively snapped back" in the early part of Q2.
- Coming one month ahead of the rest of the Wall Street banks, Jefferies results are often seen as a bellwether of what to expect. It sounds like Goldman (NYSE:GS), Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), CItigroup (NYSE:C), and JPMorgan (NYSE:JPM) have the month of March to make up for what was a very lame start to the quarter.
- ETFs: IAI, KCE, KBWC
Mon, Mar. 14, 3:19 PM
- The financial sector (NYSEARCA:XLF) has performed woefully this year, and the banks (NYSEARCA:KBE) even worse. Cornerstone Macro technician Carter Worth finds twenty names trading well beneath their (falling) 150-day moving averages.
- The group has shown signs of life lately, and Worth thinks the stocks could move back to their 150-day averages, as stocks in other market sectors have done.
- It's strictly a trade, says Worth, who continues to rate the financials as Underweight. The 20:
- Ameriprise (NYSE:AMP), BofA (NYSE:BAC), Banner (NASDAQ:BANR), Citigroup (NYSE:C), Citizens Financial (NYSE:CFG), East West Bancorp (NASDAQ:EWBC), First NBC (NASDAQ:FNBC), HFF (NYSE:HF), KeyCorp (NYSE:KEY), Legacy Texas (NASDAQ:LTXB), Lincoln National (NYSE:LNC), Morgan Stanley (NYSE:MS), Old National (NASDAQ:ONB), PacWest (NASDAQ:PACW), PNC Financial (NYSE:PNC), Principal Financial (NYSE:PFG), Stifel Financial (NYSE:SF), SVB Financial (NASDAQ:SIVB), TCF Financial (NYSE:TCB), Wells Fargo (NYSE:WFC).
Mon, Mar. 14, 12:37 PM
- Alice Murphy returned to Bank of America (NYSE:BAC) from Goldman Sachs just over a year ago, more or less returning to her same job as co-head of leveraged finance, but reportedly with a promise of a clear path to a more senior role.
- She gets that with a promotion to head of global capital markets, taking over from Jim Probert who took on the role just two years ago.
Fri, Mar. 11, 12:49 PM
- While the big Wall Street banks are struggling with slides in fixed-income revenues, business is booming at BlackRock (NYSE:BLK) and other ETF providers offering credit-related products.
- The banks, writes Lisa Abramowicz, want some of that business back.
- The issue for banks are new regulatory and capital rules which make it harder to hold big inventories are paper investors want to trade. Meanwhile, the ease of moving in and out of vehicles like BlackRock's $25B IG bond fund (NYSEARCA:LQD) or its $16B junk-bond fund (NYSEARCA:HYG) have led to surging volumes, even as the individual securities underlying those ETFs are more difficult to trade.
- Banks are responding with the total-return swap in which an investor pays a fee to a counterparty who promises delivery of the total gain on a basket of certain debt. These instruments are not only quickly traded without having to deal with the underlying securities, but are pegged to some of the same indexes as the biggest credit ETFs. Citigroup (NYSE:C) just became the eight dealer in these derivatives (joining GS, BAC, JPM, MS, CS, DB and OTCQX:BNPQY), which are being pitched by banks as an alternative to ETFs.
Bank of America Corp. operates as a bank holding company, which provides banking and nonbanking financial services and products through its banking and various nonbanking subsidiaries throughout the U. S. and in certain international markets. It operates through five segments: Consumer and... More
Industry: Regional - Mid-Atlantic Banks
Country: United States
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