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
Dec. 17, 2014, 4:30 PM
- To review, current global head of FICC David Sobotka - comfortable with the progress the struggling business has made - reportedly set a retirement date for year's end.
- He's to be replaced - reports the WSJ - by Bernard Mensah and James DeMare. Demare has been with BAC since 2008 and is currently head of global securitized products and real estate portfolio management. He'll continue to be based out of NYC.
- Mensah joined BofA in 2010, and currently runs FICC trading for EMEA. He'll continue to be based in London.
- Amid a tough time for FICC action in the banking industry, Bank of America managed to post an 11% Y/Y gain in Q3, though CEO Brian Moynihan has said Q4 isn't looking anywhere near as robust.
Dec. 17, 2014, 3:23 PM
- This time its the National Credit Union Administration Board, and it's suing Bank of America (NYSE:BAC) and U.S. Bancorp (NYSE:USB) over losses on $5.8B in MBS.
- "Even after ample evidence came to light that the trusts were riddled with defective loans, defendants shut their eyes to such problems,” according to the complaint. “As participants in many roles in the securitization process, defendants were economically intertwined with the parties they were supposed to police.”
Dec. 17, 2014, 7:36 AM
- Jefferies yesterday posted a 73% plunge in fixed-income trading revenue for the quarter ended Nov. 30, and a 45% fall in equity-trading revenue. “You’re going to see weaker trading results because of what I’d call bad volatility,” says Charles Peabody, as firms cut back on stock and bond offerings.
- That Q4 trading revenue is going to be a weak one for the likes of JPM, C, BAC, GS, and MS shouldn't be a major surprise as Ciit's Mike Corbat, BofA's Brian Moynihan, and JPM's Marianne Lake said as much when presenting at a financial services conference earlier this month. But the weakness they described is nowhere near what was reported at Jefferies.
- Alongside the weak trading results, Jefferies is also looking to get rid of Bache - its commodities-trading business. "The fact that they are throwing in the towel on this business just a few years in would suggest that maybe that opportunity is not nearly as robust as they thought it would be,” says UBS's Brennan Hawken.
- Previously: Jefferies posts loss, mulling sale of Bache unit (Dec. 16, 2014)
Dec. 11, 2014, 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
Dec. 9, 2014, 2:12 PM
- "My feeling is that if a bank has proper reserves and it’s trading well below tangible book value, that is an undervalued bank," Mohnish Pabrai tells Barron's, quickly summing up the investment case for two of his holdings, Bank of America (BAC -1.1%) and Citigroup (C -1.1%). "You could shut down a bank today and if the reserves are correct you would get back the tangible book value."
- Both are trading a lot closer to book (or even above) then they were when he first invested, but Pabrai considers them still undervalued and expects they'll eventually trade more inline with the higher P/B and P/E multiples of Wells Fargo and JPMorgan.
- Of his $700M AUM fund which has outperformed the S&P by about 150 basis points annually over the last decade, the Buffett disciple Pabrai keeps fees down thanks to low overhead - he's the sole analyst and portfolio manager.
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.
Other News & PR