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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.
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, 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
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
Thu, Oct. 16, 7:08 AM
- "Given drastically reduced litigation expenses going forward, we think the core earnings power of the company should begin to accrete to existing shareholders, allowing book value growth at a company that has struggled to grow TBV since the crisis," says FBR's Paul Miller, upgrading Bank of America (NYSE:BAC) to Outperform, with price target lifted to $20 from $18.
- On target cost savings, he says, has proven management's ability to execute its strategy to improve shareholder returns, and he sees the possibility for 2015 EPS to exceed his $1.60 estimate.
- Previous earnings coverage
- Shares -1.8% premarket as broad markets are set for another tough day.
Wed, Oct. 15, 7:22 AM
- Net income of $168M includes a $5.3B or $0.43 per share pre-tax legal charge for global mortgage settlement. Earnings one year ago were $2.5B, or $0.20 per share.
- Net interest income of $10.4B flat from a year ago.
- Noninterest income gained 2% Y/Y, when excluding DVA adjustments. Net charge-offs of $1B fell 38%. Net charge-off ratio of 0.46 compares to 0.73 one year ago.
- Noninterest expense of $19.7B vs. $16.4B a year ago. Excluding litigation expense, noninterest expense of $14.2B fell 7% Y/Y, thanks to sizable personnel cutbacks (mostly in legacy mortgage).
- Consumer and Business Banking net income of $1.856B vs. $1.787B a year ago. Average deposit balances up 4%. Mobile banking customers up 15% to 16.1M - 11% of deposits were made via mobile vs. 8% a year ago.
- Consumer Real Estate Services net loss of $5.184B vs. loss of $990M a year ago, thanks to the mortgage settlement. $11.7B of mortgages originated and $3.2B of home-equity loans vs. $22.6B and $1.8B a year ago.
- Global Wealth and Investment Management net income of $813M vs. $720M a year ago.
- Global Banking net income of $1.414B vs. $1.137B a year ago.
- Global Markets net income of $769M vs. a loss of $875M a year ago. FICC revenue of $2.2B gains 11% Y/Y, driven by currencies as volatility returned late in the quarter.
- Tangible book value per share of $14.13 vs. $13.62 one year ago.
- Conference call at 8:30 ET
- Previously: Bank of America beats by $0.08, beats on revenue
- BAC +1.2% premarket
Thu, Oct. 2, 7:28 AM
- Bank of America (NYSE:BAC) is boosted to a Buy with price target raised to $20 from $16.80, while JPMorgan (NYSE:JPM) is cut to a Neutral with $64 price target.
- BofA's deposit profile means it will be under less pressure than peers to pass along Fed rate boosts to depositors, says UBS. JPMorgan, on the other hand, has a smaller amount of "core deposits" than its peers, says UBS, and could see outflows when rates rise.
- BAC +1%, JPM -1% premarket
Thu, Sep. 25, 3:09 PM
- Today's resignation of Attorney General Eric Holder could mark the beginning of the end of the Justice Department’s push to hold big banks accountable for their conduct leading up to the financial crisis.
- Several big banks, including Goldman Sachs (GS -2.1%) and Wells Fargo (WFC -1.1%), are still under investigations by the Justice Department for their sale of flawed mortgage securities before 2008, but settlements in those cases are expected to be much smaller than the big sums extracted from Bank of America (BAC -1.8%), JPMorgan Chase (JPM -2%) and Citigroup (C -2.2%).
- Another sign that the big bank cases may be winding down: Tony West, who was Holder’s point man in the bank settlement talks, recently left the Justice Department to join PepsiCo as its general counsel.
Thu, Sep. 18, 12:53 PM
- Banks, insurers, brokerages and anything else starved for yield continue to gain following yesterday's FOMC news. Among the gainers are Bank of America (BAC +1.9%) - which breaks above $17 for the first time since April - Citigroup (C +2.7%), Wells Fargo (WFC +1.1%), PNC (PNC +1.1%), Fifth Third (FITB +1.7%), SunTrust (STI +1.2%), Schwab (SCHW +2.3%), Prudential (PRU +2.5%), and Lincoln National (LNC +2.4%).
- The XLF +1.2%, KBE +1.5%, and KRE +2%.
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, RYF, KRS, FINZ
- Lit up bright red is the utility sector (XLU -1%), led by Southern Company (SO -1.1%), Dominion Resources (D -1.2%), Duke Energy (DUK -1.4%), and Pinnacle West (PNW -1.9%).
- Utility ETFs: XLU, IDU, VPU, UPW, RYU, FUTY, PUI, FXU, SDP, PSCU
Wed, Sep. 17, 3:16 PM
- Leading markets higher as the reality of higher interest rates gets nearer is the financial sector (XLF +0.9%). Whether its banks, brokerages, or insurers, a higher benchmark rate for some time has been considered a key bullish catalyst. An especially large move is being seen in the online brokerage names who have been forced to forego money market fees for years thanks to ZIRP: E*Trade (ETFC +3%), Schwab(SCHW +3.2%), Ameritrade (AMTD +2%).
- Morgan Stanley (MS +1.8%), Bank of America (BAC +1.2%), JPMorgan (JPM +0.9%)
- U.S. Bancorp (USB +1.1%), Regions Financial (RF +2%), New York Community Bank (NYCB +0.8%), Huntington Bancshares (HBAN +1.3%), KeyCorp (KEY +1.3%)
- MetLife (MET +0.6%), Voya Financial (VOYA +0.7%).
- Chubb(CB +0.4%), AIG (AIG +1.1%), Hartford (HIG +0.8%)
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, SEF, IYG, IAK, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, KBWP, RYF, KBWI, KRS, FINZ
Tue, Sep. 9, 12:24 PM
- The Fed intends to impose a capital surcharge on banks tougher than the international standard, according to Fed Governor Daniel Tarullo's prepared remarks for the Senate Banking Committee. Those banks with heavier reliance on short-term funding like overnight loans - i.e. Goldman Sachs (GS -1%) and Morgan Stanley (MS -1.8%) - will likely face even more rigorous requirements.
- Officials haven't yet decided on a number, but reportedly are considering as much as 200 basis points more than the top range of 2.5% of risk-weighted assets agreed to by international regulators.
- What's not yet clear is who would need to raise capital to meet the new, tougher standard.
- Citigroup (C -1%), Bank of America (BAC -0.6%), JPMorgan (JPM -1.3%), Wells Fargo (WFC -0.4%), State Street (STT -1.1%), Bank of New York Mellon (BK -0.9%)
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, KBWC, FINZ
Mon, Sep. 8, 8:41 AM
- "The major catalyst for shares in our opinion is the resolution of the bulk of Bank of America's (NYSE:BAC) legal issues with its AG settlement," says analyst Richard Ramsden, upgrading to a Buy with price target lifted to $19 from $17.
- "Legal costs have obscured much of the fundamental improvement at BAC."
- Shares +1.1% premarket
Thu, Aug. 21, 2:51 PM
- "We can start to see how [Brian Moynihan] can start running the company for shareholders and not litigants," says analyst Marty Mosby following Bank of America's (BAC +3.8%) $16.65B mortgage settlement with the government.
- The removal of the legal overhang is nice as is today's rally, says portfolio manager Dave Ellison (an owner of the stock), but higher interest rates are necessary for a sustained move upward in the shares.
- "We believe they have a wonderful franchise - the question now is, 'Do they,'" says fund manager Greg Donaldson. "If they do, their earnings will move sharply up because all of their energies will be poured into making their businesses better."
- And from The Oracle - whose 700M warrants struck at $7.14, if exercised, would make Berkshire Hathaway BofA's largest shareholder? "[Moynihan] is nurturing a huge and attractive underlying business that will endure long after today's problems are forgotten," he said in his annual letter in 2012.
- Previously: Bank of America confirms U.S. deal; +1.1% premarket
Thu, Aug. 21, 9:12 AM
- Previously tipped off as being about $17B, the $16.65B comprehensive mortgage-related settlement with the DOJ and six states' Attorneys General includes a $9.65B cash payment and about $7B of consumer relief.
- The deal is expected to reduce Q3 pretax earnings by $5.3B and EPS (after tax) by about $0.43 per share.
- Source: Press Release
- BAC +1.1% premarket
- Previously: BofA reportedly settles mortgage claims for $17B
Wed, Jul. 2, 11:42 AM
- Key to analyst Matt O'Connor's upgrade of Bank of America (BAC +2.5%) is his improved outlook for fixed income trading revenue. The whole world knows about the slowdown in this segment for the big banks, and expectations can hardly get any worse.
- Following what is sure to be an ugly print for Q2 results, the year-over-year comparisons begin to get a lot easier, notes O'Connor.
- Other catalysts: An improved M&A environment, higher interest rates, an improving economy, and finally, a Republican sweep in November could prove a boon for the entire banking sector.
- Previously: BofA boosted by upgrade
Fri, Jun. 6, 8:00 AM
- Bank of America (BAC) is lower by 0.5% in premarket action after last night's report suggesting the minimum tab for settling over mortgages with the DOJ and several states is $12B, with the final bill likely to surpass JPMorgan's record $13B from last year. For perspective, the bank earned $11.43B in 2013.
- At least $5B of the settlement is expected to go toward consumer relief - reducing principal amounts, cutting payments, and paying for blight removal in rough neighborhoods.
- It needs to be noted that the $12B figure is one offered by BofA, but the government is pushing for billions more. While talks have heated up in the past few days, it's still not clear when a deal may be reached.
- Previously: WSJ: BofA in talks to settle probes for $12B+
Tue, May. 27, 12:09 PM
- The accounting error had zero impact on operations, says Dick Bove, and it now appears no impact on capital ratios either. Buy the stock, he says, as the higher dividend and initiation of the buyback should soon be re-approved.
- Bank of America's (BAC +3.6%) capital plan - initially approved by the Fed but then suspended following the error - was for a boost in the dividend to $0.05 per share from a penny, and a $4B buyback.
- Previously: BofA resubmits capital plan to Fed; "de minimis" effect
- In other bank news, the lender has been hired by the Sterlings to sell the L.A. Clippers, reports Bloomberg, which says the asking price could be at least $1B.
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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