Bank of America CorporationNYSE
Bank Of America: Diamonds Are Forever
Fairlight Capital • 107 Comments
Fairlight Capital • 107 Comments
Mon, Oct. 17, 11:12 AM
- The bank's strong Q3 may have already been discounted by the market, which sent BAC higher by 17% over the past three months. Strong trading results were reported by JPMorgan and Citigroup on Friday, so few were surprised when BofA showed the same this morning (Global Markets net income rose 34% Y/Y).
- As for deposits and lending, average total deposits rose 6% Y/Y, and average total loans and leases gained 3%. Net interest income edged higher, with net interest yield up 4 basis points from a year ago and flat from last quarter at 2.23%. The banks says a 100 basis point parallel shift in interest rates would benefit NII by $5.3B over the next 12 months - no small amount given $10.2B of NII in Q3, and overall Q3 income of $5B.
- See earnings call presentation slides
- While credit loss provisions rose from year-ago levels, they were off nicely from Q1 and Q2.
- Noninterest expense fell to $13.5B in Q3 from $13.9B a year ago, with personnel costs down 2% and non-personnel costs off 5%. FTE headcount fell 3% Y/Y to 209K. Litigation expense of $250M in Q3 vs. $231M a year ago.
- Reporting from the earnings call, Charlotte Business Journal's Hilary Burns quotes CEO Brian Moynihan getting a small dig in on Wells Fargo: "'It's not about the number products we open it's whether customers want and need products we are offering them."
- Asked whether there will be shareholder pressure to separate the CEO/Chairman roles given the Wells Fargo scandal, Moynihan reminds that the bank's owners voted not to do so a year ago.
- The stock has given up early gains, now down 0.25%.
- Previously: Bank of America up 1% premarket after strong quarter (Oct. 17)
Mon, Oct. 17, 9:52 AM
- Customers of offerings like JPMorgan's (NYSE:JPM) Sapphire Reserve card can't believe their good fortune, but bank shareholders can't be faulted for wondering whether there's going to be any profits from the growing rewards war.
- "You have five or six big national players and they are going around killing one another," says Oppenheimer's Chris Kotowski.
- It's the banking version of a loss leader. The upfront rewards are well above the annual fee, but if customers hold onto the card after the first year, and better yet hold a balance, they could become profitable.
- "It has been a huge success," says the bank's card boss, Kevin Watters. Speaking on Friday's earnings call, CFO Marianne Lake declined to say how much card debt customers need to take on before a profit can be turned.
- Citigroup's (NYSE:C) spending on cards has also been aggressive, but personal finance gurus say its Prestige premium card needs to up its rewards game to compete with JPMorgan's offering.
- Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) also naturally want to boost card business, but until now have mostly refrained from joining the war, and earlier this month, American Express (NYSE:AXP) boosted rewards on its Platinum card, though saying publicly the move wasn't in response to JPMorgan and Citi.
Mon, Oct. 17, 7:18 AM
- Q3 net income of $5B or $0.41 per share vs. $4.6B and $0.38 one year ago, with revenues up 3% Y/Y to $21.6B.
- Noninterest expenses down 3% to $13.5B. Provisions of $850M up from $806M. Net charge-offs of $888M vs. $932M.
- ROA of 0.90%; ROTCE of 10.3%. Book value per share of $24.19 up 8%; tangible book value per share of $17.14 up 11%. Friday's close was $16.24. $2.2B of capital returns during quarter ($1.4B in buybacks and $800M of dividends). CET1 ratio of 10.9% up 40 bps during quarter.
- Consumer Banking net income of $1.813B vs. $1.757B a year ago. Noninterest expense of $4.371B down from $4.711B. Average deposits and average loans both climbed. Mortgage production of $20.4B up from $16.9B. Mobile banking active users of 21.3M up from 18.4M. Branches down to 4,629 from 4,741. Efficiency ratio of 55% improves from 59%.
- Global Wealth and Investment Management net income of $697M vs. $632M a year ago. Expenses of $3.257B down from $3.470.
- Global Banking net income of $1.553B up from $1.278B a year ago.
- Global Markets net income of $1.074B up from $800M a year ago, with revenue jumping to $4.486B from $3.738B. Sales and trading revenue of $3.7B up 18%; FICC revenue up 39%; equities revenue down 17%.
- Conference call at 8:30 ET
- Previously: Bank of America beats by $0.08, beats on revenue (Oct. 17)
- BAC +1% premarket
Mon, Oct. 17, 6:48 AM
Sun, Oct. 16, 5:30 PM
Fri, Oct. 14, 9:42 AM
- JPMorgan and Citigroup both easily topped estimates thanks to a big rebound in previously-in-the-doldrums markets revenue. JPM is higher by 1%, and Citi by 2%. The read-through is pushing Goldman Sachs (GS +3%), Morgan Stanley (MS +2.7%) and Bank of America (BAC +2.4%) all nicely higher.
- Less capital-markets focused, Wells Fargo also beat forecasts, but not as soundly. As usual of late, it's lagging its TBTF peers, up just 0.3%.
- XLF +1.2%, KRE +1.4%, KBE +1.5%.
- Other individual names: Regions Financial (RF +2.5%), Huntington Bancshares (HBAN +2.1%), KeyCorp (KEY +1.9%), Fifth Third (FITB +1.5%), SunTrust (STI +1.3%), M&T (MTB +1.7%)
Thu, Oct. 6, 5:02 PM
- Looking to comply Washington's so-called fiduciary rule, Merrill Lynch (NYSE:BAC) tells its more than 14K-strong thundering herd that after April 10, investors with retirement accounts will no longer have the option of paying commissions, but will instead have to pay a fee based on their assets.
- Merrill is the first brokerage to eliminate the commission-option for clients, but it may be paving the way for rivals like Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC) to do the same.
- LPL Financial (NASDAQ:LPLA) has said it will still offer some sort of commission-based option to retirement savers.
- Source: Michael Wursthorn in the WSJ
Thu, Oct. 6, 12:32 PM
- John Thiel will step down as head of Merrill Lynch Wealth Management, effective January 1. He'll take on a new role (kicked upstairs?) at Bank of America (BAC +0.3%) as vice chairman of Global Wealth and Investment Management. He's run Merrill Lynch since 2011.
- Taking over atop Merrill will be Andy Sieg, the head of Global Wealth and Retirement Solutions for the last five years.
Thu, Oct. 6, 11:14 AM
- Sandler O'Neill's Jeffrey Harte's earlier reported valuation-based downgrade of JPMorgan (JPM -0.8%) also comes with a recommendation to consider less expensive and less widely-owned TBTF names like Bank of America (BAC -0.2%) and Citigroup (C -0.3%).
- Turning back to JPMorgan and its Q3 earnings set for release on October 13, Harte, sees a 4% sequential decline in revenues to $24.2B, with Consumer and Community Banking revenues down 2%, and Corporate & Investment Banking revenues down 11% (thanks to seasonal factors).
- Look for expenses to be up 4%, but down 1% ex-legal costs.
Tue, Oct. 4, 2:19 PM
- A Bloomberg report says the ECB is likely to gradually wind down bond purchases ahead of the scheduled March 2017 end of its QE program. The central bank is currently buying €80B per month of government and corporate paper, and may begin to slow that amount by €10B per month, according to the story.
- Yields are higher in Europe and the U.S., with the 10-year U.S. Treasury up five basis points to 1.675% and the German 10-year Bund yield is up four bps to -0.048%. TLT -1.1%, TBT +2.2%
- Though the Dow and S&P 500 are each lower by 0.5%, the yield-starved XLF is up 0.6%, with Bank of America (BAC +2.1%), Citigroup (C +1.9%), and JPMorgan (JPM +0.4%) leading the way. Shrouded in scandal, Wells Fargo (WFC -0.2%) continues to underperform.
- Other names: Regions Financial (RF +1.5%), KeyCorp (KEY +2.1%), BB&T (BBT +1.4%), Schwab (SCHW +1.5%), MetLife (MET +1.1%), Prudential (PRU +1.3%).
- ETFs: XLF, FAS, FAZ, KRE, UYG, VFH, KBE, IYF, BTO, IAT, IYG, FNCL, SEF, FXO, KBWB, QABA, KBWR, RYF, FINU, KRU, RWW, XLFS, FINZ, KRS, JHMF, WDRW, DPST, FAZZ, FNCF
Mon, Oct. 3, 9:04 AM
- September monthly performance was: +0.5%
- 52-week performance vs. the S&P 500 is: -3%
- $0.04 in dividends were paid in September
- Top 10 Holdings as of 6/30/2016: JPMorgan Chase & Co (JPM): 3.02927%, US Treasury Note 1.125%, Citigroup Inc (C): 2.72752%, Bank of America Corporation (BAC): 1.75979%, General Electric Co (GE): 1.64495%, Apache Corp (APA): 1.43672%, Merck & Co Inc (MRK): 1.40565%, Royal Dutch Shell PLC Class A (OTCPK:RYDAF): 1.39841%, Morgan Stanley (MS): 1.39796%, US Treasury Note 0.625%
Fri, Sep. 30, 11:37 AM
- The ADRs of Deutsche Bank are higher by 15% on a report it's near settling U.S. mortgage-related charges for just $5.4B (versus the $14B which had previously been floated).
- The move has lifted Europe out of the red, led by Germany's (NYSEARCA:EWG) 1% gain. The Dow's (NYSEARCA:DIA) 1% advance is leading the U.S. averages higher.
- Bank of America (BAC +3.1%), Citigroup (C +3.2%), JPMorgan (JPM +1.7%), Wells Fargo (WFC +0.7%), Goldman Sachs (GS +1.7%), Morgan Stanley (MS +2.9%). XLF +1.5%
Thu, Sep. 29, 3:35 PM
- Deutsche Bank's (DB -6.5%) steep tumble has stabilized a bit over the past couple of hours, but DoubleLine bond guru Jeffrey Gundlach says it's got a ways left to go and to stay away.
- The company is hard to analyze and the prospect of a government bailout, he tells Reuters. The market sell-off "doesn't feel like" it's over by any means.
- "The market is going to push down Deutsche Bank until there is some recognition of support," he says.
- Elsewhere in sliding financials today: BAC -1.1%; C -2.1%; JPM -1.4%; GS -2.7%; MS -2.2%; OTCPK:SCGLY -3.8%.
Thu, Sep. 29, 1:30 PM
- A report that a number of hedge funds are bailing out of their Deutsche Bank exposure has sent that stock sharply lower in the last few minutes, and the move is dragging the big U.S. banks, and in turn, the major averages.
- Deutsche is now lower by more than 7%. Bank of America (BAC -1.2%), Citigroup (C -1.6%), JPMorgan (JPM -1.2%), Goldman Sachs (GS -2.1%), Morgan Stanley (MS -1.9%). The KBE and KRE are each off 1.1%.
- The Dow (DIA -0.9%), S&P 500 (SPY -0.8%), and Nasdaq (QQQ -0.6%).
Wed, Sep. 28, 9:32 AM
- "Large banks are going to be forced to take on more capital," says Dick Bove. "It will make the cost of funding more, not less, expensive. It will reduce the appeal for investors to put money at risk in the banking system."
- Bove is commenting on a weekend announcement from Fed Governor Daniel Tarullo promising future stress tests will be geared to demanding even higher cash buffers for banks. Set to take effect next year, the new rule could raise capital requirements for the largest banks by 3 or 4 percentage points, writes Jeff Cox at CNBC.
- Interested parties: BAC, C, WFC, JPM, GS, MS
- There's good news though, as those lenders with less than $250B in assets won't be subject to the same standards. FBR's Edward Mills calls it a "significant positive" for regionals, which now have more certainly on the process, reduced regulatory expenses, and thus the ability to return more capital to owners.
- Interested parties: RF, ZION, CMA, KEY, FITB, STI, NYCB, HBAN, PNC, BBT, MTB
- ETFs: KRE, KBE, IAT, KBWB, QABA, KBWR, KRU, PSCF, KRS, WDRW, DPST
Tue, Sep. 27, 12:18 PM
- "How can a market trading for 17-18x forward earnings be anchored to a financial system that only merits a 12-13x multiple," asks Convergex's Nicholas Colas. "Why should U.S. equities overall be up 5-12% and banks stocks only flat on the year?"
- Checking back to other times when broader markets diverged from the financial sector - 2000 and 2007 come to mind - Colas finds the resolution didn't work out too well. The bottom line, says Colas: Either bank stocks like JPMorgan (NYSE:JPM), Bank of American (NYSE:BAC), and Citigroup (NYSE:C) are a slam-dunk buy headed into the end of the year, or the markets are about to have a serious problem.