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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.
Wed, Oct. 8, 2:18 AM
- Eighteen of the world's largest banks, ranging from Credit Suisse (NYSE:CS) to Goldman Sachs (NYSE:GS), have agreed to give up the right to "close out" deals on derivatives contracts if a financial institution runs into trouble, FT reports.
- The International Swaps and Derivatives Association is due to announce the agreement to change its “protocols”, which govern the $700T market, in the next few days. They will take effect from January 1, 2015.
- Related stocks: HSBC, JPM, OTC:BNPZY, DB, BCS, BAC, SAN, C, RBS,
Tue, Oct. 7, 7:39 AM
- Ahead of Q3 earnings results set for release this month, Wells Fargo lifts its price targets on those banks with sizable capital markets businesses, citing strong investment banking action and trading activity that's stopped falling.
- Outperform-rated Ciitgroup (NYSE:C) and JPMorgan (NYSE:JPM) have their price targets lifted to $60 from $57, and $68 from $66, respectively.
- Market Perform-rated Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) have their targets lifted to $19 from $17, $195 from $185, and $37 from $35, respectively.
Tue, Oct. 7, 2:08 AM
- BNP Paribas (OTC:BNPZY) is searching for a bank to assist with clearing its energy transactions in U.S. dollars next year, after being suspended from the dollar clearing practice due to its violation of U.S. sanctions against against Sudan, Cuba and Iran.
- The French bank made the requests to JPMorgan (NYSE:JPM), BofA (NYSE:BAC) and Citi (NYSE:C) in July and August, and although talks are still going on with the latter two, JPMorgan has decided against accepting the request.
- OTCPK:BNPQF +1.5% AH
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
Wed, Oct. 1, 5:18 PM| 35 Comments
Wed, Oct. 1, 3:39 PM
- Going on for years now has been opposition - originally led by AIG - to Bank of America's (BAC -1.3%) $8.5B deal with institutional investors over losses tied to MBS.
- The bank earlier this year ostensibly won the case in an Article 77 hearing, but the objectors gave little indication of letting go. Now joining AIG in dropping the case is Triaxx (a group of funds). Among those still in opposition is the Chicago police pension fund, which is set to argue the case on appeal later in October.
Mon, Sep. 29, 2:52 PM
- Hopefully bringing the affair to a close, the SEC fines Bank of America (BAC -0.4%) $7.65M for violating internal controls and federal laws on record-keeping related to the purchase of Merrill Lynch. The violations caused the bank to overstate its capital by greater and greater amounts until finally in April noticed to be billions of dollars.
- BofA subsequently had to cancel its planned dividend hike and buyback, and resubmit its capital plan to the Fed (since re-approved).
Mon, Sep. 29, 8:04 AM
- The usual banking suspects are falling under the gaze of regulators for a trading strategy known as "dividend arbitrage" which helps their hedge fund clients reduce taxes, and from which the banks earn more than $1B in fees annually.
- The strategy - typically run from London - involves banks temporarily transferring ownership of stock to a lower-tax jurisdiction about the time when the client expects to receive a dividend on those shares. It's perfectly legal say the banks and hedge funds.
- Bank of America (NYSE:BAC), however, has been questioned by the Richmond Fed (Charlotte comes under its purview) about the legal and reputational risks of such maneuvers, reports the WSJ.
- It isn't clear if other banks have been similarly questioned, but a number of other lenders do the same thing. Among the hedge funds which benefit from dividend arbitrage is Och-Ziff Capital Management (NYSE:OZM).
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, KBWC, FINZ
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.
Tue, Sep. 23, 3:50 PM
- Speaking at the United Nations Climate Summit Finance Session, Bank of America (BAC +0.3%) chief Brian Moynihan pledges $1B of his shareholders' capital to finance up to $10B of investment in high-impact clean energy projects, calling it the Catalytic Finance Initiative.
- Bank of America has dedicated $31.7B to low-carbon and other environmental business activities since 2007, and in 2012 announced a 10-year, $50B environmental business goal to advance lower-carbon emissions solutions.
- Press release
Sat, Sep. 20, 9:00 AM
- "Starting next year," writes Jack Hough in Barron's, "BofA (NYSE:BAC) investors will get a glimpse of two things they haven't seen in years: a fairly clean income statement and a decent dividend." Litigation costs are set to nail the bank again this quarter, but then will begin to quickly clear away, leaving investors to focus on the bank's operations. Earnings per share - an estimated $0.75 this year - could hit $2 in 2017, and the annual dividend ($0.20 now) could rise to $0.55.
- CEO Brian Moynihan notes core pretax profit in four of BofA's five units was $8.5B in Q2, up from $6.8B two years ago. Business #5 is mortgages, and that provided a $4.5B loss thanks to now rapidly fading legacy issues. Litigation costs make most of the headlines, but there's also non-litigation expenses like modifying some loans and foreclosing on others. These costs dropped to $1.4B last quarter from $2.3B a year earlier, and are expected to fall to $500M in 2015.
- Upgrading BofA to a Buy earlier this month, Goldman - looking past litigation and other one-time items - says the bank has had the largest reduction in earnings volatility of any of its peers in recent years and the stablest trading revenues since 2013. The beacon is Wells Fargo - earnings stability and a higher dividend has that stock trading at a premium 1.7x book value. BofA is at 0.8x, and as its steadier earnings begin to become clearer, that valuation discount should narrow.
- Bank of America is also underowned, says Goldman, noting its weighting in mutual funds relative to its weighting in the S&P 500 is the second lowest among 25 large financials (the lowest is Berkshire Hathaway).
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
Wed, Sep. 17, 8:20 AM
- Isn't this one of the ways we got into the housing mess? Citigroup (NYSE:C) signs on with Bank of America (NYSE:BAC) to fund 15-year mortgages at below-market rates for borrowers with low incomes, spotty credit histories, or both.
- The loans are being originated by the Neighborhood Assistance Corporation of America (NACA), a group - that has the ear of HUD - known for pushing banks to show they're fulfilling the terms required of them by the Community Reinvestment Act of 1977 (no redlining).
- The moves also follow the banks' massive mortgage settlements, part of which were agreements to provide assistance to troubled mortgagees, though both say this new program is not related.
- For its part, NACA says the foreclosure-loss rate on more than 18K purchase loans it has originated since 2006 is about 0%, with one of the reasons being NACA making up to three months of mortgage payments when borrowers run into trouble.
Tue, Sep. 16, 10:48 AM
- Speaking at the RBC Capital Markets conference, the new co-heads of Bank of America's (BAC +0.3%) consumer banking operation say the bank isn't going to get too aggressive in mortgages anymore.
- "We're not going to get into correspondent," says Dean Athanasia. "We're not going to do things to attract all sorts of non-customers.”
- Less new strategy than a recommitment of one made a few years back, the mortgage restraint led Bank of America to miss the refinancing boom of the past few years. Its market share in mortgages - above 20% in 2009 - has fallen to 5%, and competitors like JPMorgan and Wells Fargo still get plenty of mortgage volume buying business from third parties.
Tue, Sep. 16, 7:20 AM
- Morgan Stanley's (NYSE:MS) chairman of China investment banking Alex To plans to exit soon to run Bank of America's (NYSE:BAC) investment bank in that country. To joined Morgan in 2006 and played a key role in Shuanghai's purchase of Smithfield foods last year. His bank currently ranks sixth in investment banking revenue in Asia ex-Japan, according to Dealogic. BofA ranks ninth.
- The move is the latest in a series of management moves in China investment banking - in July JPMorgan grabbed UBS's top guy, and last month Morgan Stanley lured over a Deutsche Bank executive.
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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