Thu, Jan. 29, 11:47 AM
- "We certainly recognize all the headwinds, notably on the regulatory capital side, but low-hanging fruit on capital efficiency actions should drive some ROE improvement," says the team of David Trone and Pankaj Chitrakar, and they expect better CCAR outcomes for at least a few of the names (including Citi, one would think) in a few weeks.
- As for operating results, whether they come in good or not so good this year hinges on whether the Fed hikes or not. That forecast sounds a lot like 2014, 2013, and 2012, but the two note the likelihood of higher rates appears far higher this year.
- They maintain Buy ratings on Citigroup (C +0.1%), Morgan Stanley (MS +1%), Goldman Sachs (GS +1%), Bank of America (BAC +0.7%), and JPMorgan (JPM +1.1%), with Citi, Goldman, and Morgan Stanley their top picks.
- Previously: Financials go on sale in January (Jan. 24)
Sat, Jan. 24, 4:48 PM
- The financial sector is off to a worse start to the year than even the energy names, with the XLF down 3.9% YTD vs. the XLE's 3.2% decline. The S&P 500 is roughly flat. The SPDR KBW Bank ETF (NYSEARCA:KBE) is off 7.5%, and the Regional Bank ETF (NYSEARCA:KRE) is lower by 6.9%.
- Q4 earnings results haven't been wonderful, but financial names had been savaged well before those reports started coming out. Instead there's a difficult regulatory regime that won't quit, and - for now - it's looking like "wait'll next year" for the rising interest rates that were supposed to drive profit margins higher. The 10-year/2-year spread - already pretty low at 150 basis points to start the year - has narrowed to 137 bps.
- A partial roll call of banks: Bank of America (NYSE:BAC) -12.1% YTD, Citigroup (NYSE:C) -10.1%, JPMorgan (NYSE:JPM) -9.4%, Morgan Stanley (NYSE:MS) -9.4%, Regions Financial (NYSE:RF) -14.7%, KeyCorp (NYSE:KEY) -4.5%, PNC Financial (NYSE:PNC) -5.4%, Bank of New York (NYSE:BK) -9.1%, Capital One (NYSE:COF) -6%, Discover (NYSE:DFS) -13.6%.
- Other spread-starved sector names: MetLife (NYSE:MET) -9.8%, AIG (NYSE:AIG) -8%, Prudential (NYSE:PRU) -10.8%, Schwab (NYSE:SCHW) -9.9%.
- Some of what's working in financials: Blackstone (NYSE:BX) +6.7%, E*Trade (NASDAQ:ETFC) +1.2%, WisdomTree (NASDAQ:WETF) +12.3%, Legg Mason +2.8%.
Fri, Jan. 23, 3:06 PM
- It's something Bank of America (BAC -1.6%) hasn't done in more than a decade, writes Deon Roberts - opening a branch in a new market.
- This week, the bank cut the ribbon on a branch in Denver, its first in that state, and BofA says there's more to come. In addition, the bank plans to open its first branch in Minnesota in Q2. It will come in Minneapolis and be followed by other branches in the Twin Cities area over the next two years.
- The moves are particularly noteworthy as BofA is rapidly closing branches in other U.S. markets, but CEO Brian Moynihan is making a point of having retail locations in major markets where the bank is already serving customers and businesses through its U.S. Trust and Merrill Lynch units. “We’ll go to other markets largely just to complete the footprint,” says Moynihan. "You've got to complete the franchise."
Thu, Jan. 22, 12:35 PM
- Mercilessly sold since the year turned, banks are putting in a rare session of outperformance, helped along by some earnings beats from regional lenders and the return of animal spirits in M&A with RBC's purchase of City National (CYN +18.6%) for $5.4B.
- The XLF +1.4% vs. the S&P's 0.6% gain today, and the regional bank ETF (NYSEARCA:KRE) is higher by 3.1%.
- Among today's reporters putting in big gains are KeyCorp (KEY +5.5%), BB&T (BBT +2.4%), and Huntington Bancshares (HBAN +2.6%), though Flagstar Bancorp (FBC -4.8%) missed estimates.
- Others: Regions Financial (RF +3.9%), PNC Financial (PNC +1.6%), Synovus (SNV +3.2%), M&T Bank (MTB +3%), Hudson City (HCBK +3.1%), First Horizon (FHN +2.7%), and First Republic (FRC +4.9%).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, IAI, SEF, IYG, FXO, FNCL, KBWB, QABA, FINU, KRU, RWW, KBWR, RYF, PSCF, FINZ, KRS
- Among the TBTFs, Citigroup (C +2.7%) and Bank of America (BAC +2.5%) are leading the way.
Wed, Jan. 21, 12:19 PM
- Bank of America (NYSE:BAC) hired Tim Watson in 2010 to lead its Canadian energy and power investment banking operation, but those services aren't in great demand at the moment thanks to the crash in oil prices, and he's left the firm, reports Bloomberg.
- Previously: Unexpected rate cut for Canada (Jan. 21)
Thu, Jan. 15, 9:51 AM
- With Bank of America (BAC -3.1%) getting battered again (now off 13.8% YTD) after this morning's mixed earnings report, let's get a bull's take:
- EPS was about inline despite the revenue miss, says Evercore ISI's Glen Schorr, and the bank still has a good story to tell on expenses (off 8%, ex-litigation), capital, leverage, and credit. Consumer & business banking, wealth management, and global banking are all performing well and are why investors will be patient on BAC as a U.S. economy/higher interest rate play.
- "Our gut is investors will be bummed about the revenue decline but stick with the stock as story hasn’t changed and valuation is a lot more palatable post the recent drop.”
- Previously: BofA earnings call: There's good volatility and bad volatility (Jan. 15)
- Previously: BofA off 2% after Q4 results (Jan. 15)
Thu, Jan. 15, 9:19 AM
- "FICC trading tends to do best in a rising rate environment when activity levels rise as rates rise," says Bank of America (NYSE:BAC) CFO Bruce Thompson on the earnings call. In other words, volatility for its own sake isn't necessarily good for FICC as new issuance slips when credit markets back off. "That's what I would characterize as bad volatility."
- Webcast and presenation
- Earlier, the bank reported FICC revenue of $1.5B in Q4, down from $1.9B from last year's already weak level.
- In the meantime, Bank of America remains a cost-cutting play, and CEO Brian Moynihan's "New BAC" had the bank cutting another 300 branches in 2014 to 4,855, and another 18.4K employees to 223.7K. Helping is mobile, with the number of mobile customers up 15% Y/Y, and 12% of deposits done with mobile vs. 9% a year ago.
- Shares -2.9% premarket and now off nearly 15% YTD.
- Previously: BofA off 2% after Q4 results (Jan. 15)
- Previously: Bank of America EPS of $0.25 (Jan. 15)
Thu, Jan. 15, 7:26 AM
- The headline revenue figure of $18.73B missed estimates by a wide margin, but included $1.2B in negative FVA and DVA adjustments. Headline EPS of $0.25 missed by $0.07, but those same adjustments lowered EPS by $0.07.
- Consumer and Business Banking net income of $1.758B vs. $1.992B a year ago on revenue of $7.541B vs. $7.496B. Provision for credit losses of $670M vs. $4427M. Noninterest expense of $4.015B about flat from last year. Average deposit balances up 4% to $550.4B. Number of mobile banking customers up 15% to 16.5M, with 12% of deposits done through mobile vs. 9% a year ago.
- Consumer Real Estate Services loss of $397M vs. a loss of $1.035B a year ago on revenue of $1.174B vs. $1.712B. Noninterest expense of $1.945B vs. $3.752B thanks to lower litigation and staffing costs. $11.6B in mortgages and $3.4B in HELOCs vs. $11.7B and $3.2B a year ago.
- Global Wealth and Investment Management net income of $706M vs. $778M a year ago on revenue of $4.602B vs. $4.479B. Client balances of $2.5T up 6% Y/Y.
- Global Banking net income of $1.433B vs. $1.255B a year ago on revenue of $4.057B vs. $4.303B.
- Global Markets loss of $72M vs. a loss of $47M a year ago on revenue of $2.990B vs. $3.816B (after DVA adjustment). FICC revenue of $1.5B vs. $1.9B a year ago, driven by declines in credit and mortgages, partially offset by stronger forex and rates results (similar to what JPMorgan reported yesterday).
- Book value per share of $21.32 vs. $20.71 a year earlier. Common equity tier 1 capital ratio of 10% vs. 9.5% the previous quarter.
- Conference call at 8:30 ET
- Previously: Bank of America EPS of $0.25 (Jan. 15)
- BAC -2% premarket
Thu, Jan. 15, 7:05 AM
Wed, Jan. 14, 5:30 PM
Tue, Jan. 13, 3:21 PM
- 2015 has opened much like 2014, with interest rates doing the exact opposite of what most expected, and falling sharply. It's a tough start for bank investors who have been counting on higher interest rates to help boost earnings for a number of years.
- In the meantime, deposits keep rolling in, and the pace of lending growth isn't quick enough to absorb all the money. In 2014, loan balances rose 4.4%, but securities holdings popped 12%, and cash assets jumped 22%.
- The good part of falling yields are unrealized gains on those security portfolios - negative a year ago, they're were in the green by about $15B on Dec. 31. More good news, says Goldman's Richard Ramsden: Valuations. The big banks are priced at about 9.9x estimated 2016 earnings, allowing for some nice upside if and when rates do decide to go higher.
- Reporting Q4 results tomorrow are JPMorgan (JPM) and Wells Fargo (WFC -0.8%), and on Thursday are Bank of America (BAC -1.4%) and Citigroup (C -0.9%).
Tue, Jan. 13, 12:57 PM
- BofA (BAC -0.1%) has cut ties with about 150 hedge funds in its prime brokerage group, reports Bloomberg, as new capital rules make the business less profitable (on an ROE basis).
- The bank had high hopes for its prime brokerage business after buying Merrill Lynch in 2009. "Hedge fund managers should expect banks to become more discerning in their allocation of equity to support new and existing business - redirecting resources away from businesses that are expected to earn low returns on equity,” said JPMorgan in a recent report.
Mon, Jan. 12, 8:43 AM
- The collapse in oil prices is set to crimp one of the few fast growth areas for banks since the financial crisis - lending to the energy industry. Right now, we're just talking about a slowdown in lending, but Charles Peabody - who saw the losses incurred by Texas banks during the 1980s energy slump - expects the current situation to lead to losses as well.
- "It’s been a hot industry, probably a little too hot,” says Cullen/Frost (NYSE:CFR) CEO Dick Evans, whose bank has a sizable energy business. “But it is not time to panic. We have been in the game a long time. I am comfortable with what we have been doing.”
- The flip side of energy issues might be stronger business for banks elsewhere as consumers find themselves with more money in their pockets after filling up.
- Among the more sizable banks, Scotiabank (NYSE:BNS) leads the way with 34.6% of its investment banking revenue coming from energy companies. Next is RBC (NYSE:RY), with 20.2%, and then Wells Fargo (NYSE:WFC) with 14.9% and Citigroup (NYSE:C) with 11.8%. Others include Barclays (NYSE:BCS) with 10.7%, Credit Suisse (NYSE:CS) with 8.1%, and Bank of America (NYSE:BAC) with 7.4%.
Thu, Jan. 8, 7:50 AM
- The compliance group at Bank of America (NYSE:BAC) now resides inside risk oversight instead of legal. The move comes shortly after BofA officials discussed risk management guidelines with the OCC last month.
- The OCC reportedly pressed for the action on belief the legal group was focused on minimizing the application of rules.
- A bank spokesman said the move was part of BofA's efforts to simplify how it operates after legacy matters have been largely resolved.
Mon, Jan. 5, 1:03 PM
- An improving economy and easing of the regulatory burden will be keys for a big move higher in the big banks this year, says Barclays' Jason Goldberg, seeing double-digit percentage gains for the Citigroup (C -2.9%), Bank of America (BAC -3%), JPMorgan (JPM -2.8%), and Wells Fargo (WFC -2.6%).
- His top pick among the group is Citigroup, where the $65 price target suggests upside of more than 20%.
- Goldman has a different take, and sees the regulatory burden as making JPMorgan worth more broken up than together.
Dec. 31, 2014, 12:23 PM| 12 Comments
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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