Oct. 7, 2014, 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.
Oct. 7, 2014, 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
Oct. 2, 2014, 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
Oct. 1, 2014, 5:18 PM| 35 Comments
Oct. 1, 2014, 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.
Sep. 29, 2014, 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).
Sep. 29, 2014, 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
Sep. 25, 2014, 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.
Sep. 23, 2014, 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
Sep. 20, 2014, 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).
Sep. 18, 2014, 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
Sep. 17, 2014, 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
Sep. 17, 2014, 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.
Sep. 16, 2014, 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.
Sep. 16, 2014, 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.
Sep. 10, 2014, 11:43 AM
- Cost savings of $2B from the New BAC initiative were originally expected by mid-2015, but with $1.8B already booked by Q2, Bank of America (BAC +0.5%) expects to hit $2B by the end of this year, says CFO Bruce Thompson. The other savings initiative - Legacy Assets and Servicing costs are expected to fall to $1.1B by 2015 Q1. They were $1.4B in Q2 of this year.
- Presentation slides
- Turning to capital, the bank's fully phased-in Basel 3 common equity tier 1 ratio of 9.9% compares to the proposed minimum of 8.5% by 2019.
- As for net interest income, it's holding steady - $10.4B in Q2 vs. $10.5B two years ago - but, like everyone else in financial services, the bank awaits higher interest rates for growth in this segment.
- Credit quality trends continue to improve, and the bank is highly provisioned: Its allowance for loans and losses - $15.8B in Q2 vs. $21.2B two years ago - is 3.67x the annualized charge-off rate vs. 2.51x two years ago.
- Guidance for capital returns in 2015? The new CCAR rules aren't even out yet, says Thompson, but the bank is particularly focused on improving its metrics at those points where it was closest to failing in this year's test.
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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