Bank of America CorporationNYSE
Bank Of America: Diamonds Are Forever
Fairlight Capital • 107 Comments
Fairlight Capital • 107 Comments
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.
Mon, Sep. 26, 9:13 AM
- Responding to the slowdown in business in Asia, Bank of America (NYSE:BAC) is set to cut about two dozen investment banking jobs in the region, including those f some top rainmakers, reports Reuters.
- The news follows a report last week of Goldman Sachs set to slash about 30% of its investment banking jobs in Asia (ex-Japan).
- A BofA spokesman says the cuts account for just a small portion of its total Asia corporate and investment banking operation, and are part of an annual trimming of costs.
Fri, Sep. 23, 3:20 PM
- The change has to do with how Bank of America (BAC -0.5%) accounts for some MBS it owns, and brings its accounting inline with many of its peers.
- The bank's previous method boosted reported net interest income in times of rising rates, but cut it when rates fell. The new method will smooth that.
- In Q2, for instance, writes the WSJ's Michael Rapoport, BofA said pretax earnings were reduced by $974M thanks to "market-related adjustments" as long rates fell. A year earlier, those adjustments added $669M because rates rose.
- Under the new rules, those costs will be accounted for over the lives of the securities (the way most banks already do it) and the "market-related adjustments" line will go away.
- SEC Form 8-K
Fri, Sep. 23, 12:05 PM
- The proposed rule would make it more difficult for banks to be involved with physical commodities by raising capital requirements. Further, banks would be prohibited from activities involving power plants, and owning or storing copper.
- The Fed today begins a 90-day period of accepting public comment.
- Banks like Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) have relied on grandfather clauses to engage in physical commodity businesses not allowed for other lenders, while Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan (NYSE:JPM) remain somewhat involved in commodity trading and energy tolling activities.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, FNCL, SEF, FXO, RYF, FINU, RWW, XLFS, FINZ, JHMF, FAZZ, FNCF
Thu, Sep. 15, 11:08 AM
- Analyst Matt O'Connor checked the price action on Bank of America (NYSE:BAC) after its $4B accounting error caused a retroactive failure in the CCAR, JPMorgan (NYSE:JPM) after the London whale trading loss, and M&T Bank (NYSE:MTB) after regulators found "significant weakness" in risk management.
- He produced this chart which shows the median average selloff (both absolutely and relative to peers). Bottom line, says O'Connor: Wells' (NYSE:WFC) decline relative to the KBW Bank Index is about 50% done.
- He maintains his Buy rating and $59 price target.
- WFC is lower by another 2.1% today to $45.55, while the rest of the banking sector is modestly higher.
Wed, Sep. 14, 11:03 AM
- It's no surprise that yield-starved financials are expected to be a big beneficiary of higher base rates, but the team at Goldman has six that stand to gain the most.
- Bank of America (NYSE:BAC), BNY Mellon (NYSE:BK), Citizens Financial (NYSE:CFG), Regions Financial (NYSE:RF), Schwab (NYSE:SCHW), and Zions Bancorp (NASDAQ:ZION) make the cut.
- Goldman sees an average 46% upside to normalized earnings for the group if rates go back to 3% (a long way off for even the most hawkish).
- Used to low and slow as far as rate hikes go, investors may be overlooking the potential for even one Fed move this year to be a positive catalyst. The team suggests taking a look at 6-month and 12-month calls on their recommendation list.
Tue, Sep. 13, 10:36 AM
- The head of the CFPB was on the tape earlier saying the Wells Fargo (WFC -3.1%) account opening case isn't a signal of a broader problem in the industry, but Cowen's Jaret Seiberg says not to underestimate the political risk to the likes of Wells, Bank of America (BAC -1.8%), Citigroup (C -1.9%), and JPMorgan (JPM -1.2%). With extra ammunition given to the "break up the banks crowd," this is no longer a negligible risk.
- Wells Fargo has enjoyed special status compared to the other mega banks since the financial crisis, says Seiberg, but "life [is] about to get worse" for Warren Buffett's favorite. The bank, says Seiberg, will no longer get the benefit of the doubt. "[The] fall from golden child to problem child can be difficult and expensive."
- The Senate Banking Committee is set to hold a hearing on the Wells Fargo matter on Sept. 20.
- As for the industry as a whole, Treasury Sec. Jack Lew took to the Delivering Alpha conference this morning to wag a finger and say 'I told you so,' to those who complain about Dodd-Frank and over-regulation of banks, in general.
Tue, Sep. 13, 2:09 AM
- Despite the penalties imposed on Wells Fargo (NYSE:WFC), there is probably no broader problem in the U.S. banking industry over abusive sales practices, according to the head of the Consumer Financial Protection Bureau.
- Regulators fined the company a total of $185M last Thursday, while Moody's warned the episode would negatively affect the bank's debt. Wells paid another $5M to customers for creating more than 2M fake accounts.
- Related tickers: JPM, C, BAC, MS, USB, COF, FITB, TD, PNC, STI
Fri, Sep. 9, 10:37 AM
- Wells Fargo (WFC -0.7%) yesterday was fined $185M over its employees opening millions of fraudulent deposit and credit card accounts in order to meet sales targets and collect bonuses. The bank has fired 5.3K over improper practices.
- Over at Rafferty, Dick Bove downgrades Warren Buffett's ([BRK.A]], BRK.B) favorite bank, calling it a "very big problem," that's caused "significant" damage to Wells' business model.
- While "cross-selling" is something most lenders try to do, Wells Fargo has built its brand around this theme more than its peers. The charges, says Bove, reopens the question about whether customers can trust their banks and to whether another wave of regulation is needed.
- Compass Point's Isaac Boltansky says the news is "bigger than WFC" and should be viewed as "clear, undeniable warnings" to the entire industry on cross-selling. The bit firmly between its teeth now, look for more enforcement actions from the CFPB.
- Similar thoughts are hitting the tape from Sandler O'Neill, Evercore ISI, and RBC.
- Interested parties include: BAC, JPM, C
- ETFs: KBE, KRE
Thu, Sep. 8, 10:35 AM
- "We had a war to fight that few other people had between cleaning up the mortgage mess, the cost structure and the litigation," Bank of America (BAC +0.3%) CEO Brian Moynihan tells CNBC, defending his stock's lagging performance over the past five years.
- "That war is over," he says, but the lessons learned will continue to be applied.
- At BAC's current price, Moynihan and company are happy to buy back stock "all day long."
- Despite a major summer surge, Bank of America is still lower by nearly 7% this year versus a 2.5% gain for the S&P financial sector.
Tue, Sep. 6, 11:03 AM
- August monthly performance was: +1.89%
- 52-week performance vs. the S&P 500 is: -13%
- No dividends were paid in August
- 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%
Thu, Sep. 1, 2:36 PM
- The Fed stress tests are the centerpiece of post-crisis bank regulatory reform, and that the banks would even consider challenging a bureaucracy that's not in the habit of being challenged is a shocker. The WSJ, however, reports bank trade groups and industry advisers are debating just that, but say talks are still in an early stage.
- Fans of Dodd-Frank will naturally argue the stress tests have made the banks far safer, but at what expense to investors? A main area of contention is the opacity of the tests, says the report, as well as the ability of regulators to block returns for subjective reasons (such as challenging them?).
- Perhaps lenders are feeling their oats following MetLife's successful challenge of its SIFI designation. If the insurer can take on Uncle Sam and win, why not the banks?
- Interested parties are too numerous to name, but include: Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), JPMorgan (NYSE:JPM).
- ETFs: KBE, KRE
Thu, Sep. 1, 4:09 AM
- Despite an increasing regulatory burden and lackluster share performance, the U.S. banking industry just logged its most profitable quarter ever, according to figures from SNL Financial and S&P Global Market Intelligence.
- Earnings for the three-month period totaled $43.6B, compared to the $43.01B in Q2 of 2015, a 1.4% beat.
- On a sequential basis, the April-to-June period topped the previous quarter by $4.56B, an 11.7% rise.
- Related tickers: JPM, C, BAC, WFC, GS, MS, USB, BK, STT, PNC, COF
Wed, Aug. 31, 8:40 AM
Tue, Aug. 30, 12:29 PM
- The talk out of Jackson Hole increases the chance of a rate hike sometime this year, says S&P Global Market Intelligence's Erik Oja, lifting his price target on Bank of America (BAC +1.5%) to $18 from $16 (current price is $16.09).
- His 2016 EPS estimate is raised to $1.27 from $1.26 and 2017 to $1.43 from $1.40.
- All large U.S. banks should see an immediate benefit from higher rates, with BofA in line for $120M in incremental revenues for each 25 bp rate hike.