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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.
Fri, Jul. 18, 6:48 PM
- The big banks aren't quite ready to let go of their reserve releases: The big four - JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) - released a combined $2.25B of their bad-loan reserves in Q2, up nearly 20% from the $1.88B they released in Q1.
- The banks continue to see improvement in their customers’ credit quality, but their earnings continue to rely in part on freeing up some of their rainy-day cushions, rather than being able to generate strong earnings from their operating businesses.
- Even with the Q2 uptick, the banks are releasing less in the way of reserves than they have for most of the past four years, and analysts see the practice ending before too much longer.
- Some regional banks such as Comerica (NYSE:CMA) and Huntington Bancshares (NASDAQ:HBAN) that had been releasing reserves started building their reserves up again by small amounts during Q2.
Wed, Jul. 16, 1:22 PM
- Bank of America (BAC -1.9%) yesterday offered $13B to the Justice Department to settle mortgage claims, reports the WSJ, but the government continues to hold out for billions more.
- The Journal last month reported the bank was in talks for at least $12B.
- Earlier today: BofA Q2 earnings coverage
- Bank of America in Q2 set aside 4B in litigation expenses, up from $471M reserved for one year ago.
Wed, Jul. 16, 9:14 AM
- New BAC cost savings at a $2B annual run rate are now expected to be achieved by Q4 of this year vs. the previous goal of 2015. LAS expense excluding litigation, however, isn't falling as fast as hoped and should decline to $1.1B by Q1 2015. Full-time equivalent employees of 233.2K slips from 238.6K at the end of Q1 and 257.2K one year ago.
- Mobile banking customers grew to 15.5M and 10% of deposit transactions are now done through mobile deposits. Banking centers of 5,023 are down 72 from Q1.
- Earnings call presentation slides
- Tangible book value per share of $14.24 rises from $13.81 at the end of Q1, and $13.32 one year ago. Common equity tier 1 capital ratio of 12% rises from 11.8% at the end of Q1.
- The settlement with AIG doesn't mean the end of the Article 77 hearing, but that company was the largest holder and strongest objector to the $8.5B settlement
- Previously: Another big bank beats; this time BofA
- Priced in? Up more than 3% in the past three sessions on strong earnings from Wells Fargo, Citi, JPMorgan, and Goldman, BAC is lower by 0.5% premarket.
Wed, Jul. 16, 7:25 AM
- Net income of $2.3B or $0.19 per share includes pretax litigation expense of $4B, or $0.22 per share after tax.
- Net interest income of $10.226B falls 5% Y/Y, with NIM off 2 basis points to 2.26%.
- Noninterest income of $11.734B falls 4%. Consumer and Business banking net income of $1.788B rises 29% from a year ago, with mobile banking customers of 15.5M up 17%. Consumer Real Estate Services net loss of $2.8B compares to net loss of $930M a year ago, with 1st-mortgage originations off 59%. Global Wealth and Investment Management net income of $724M falls from $759M. Global Banking net income of $1.353B vs. $1.3B a year ago. Global Markets net income of $1.1B gains 14%, with FICC revenue of $2.4B up 5% Y/Y.
- Noninterest expense of $18.5B rises from $16B thanks to litigation expenses. Excluding that, noninterest expense of $14.6B declined 6% as the bank continues to cut staff, particularly in LAS (legacy mortgage servicing).
- The bank settles with AIG over all MBS issues for $650M, and AIG agrees to pull its objection to BAC's $8.5B private-label securities settlement (the Article 77 proceeding).
- Tangible book value per share of $14.24 up from $13.81 at end of Q1.
- Shares flat premarket
- Previously: Bank of America beats by $0.12, beats on revenue
Wed, Jul. 16, 7:03 AM
Tue, Jul. 15, 5:30 PM
Thu, Jul. 10, 7:26 AM
- The bank last March originally received Fed permission to boost its quarterly payout from $0.01 to $0.05 (along with a $4B buyback), but was forced to withdraw that plan after discovering it miscalculated capital levels.
- Bank of America (BAC) subsequently fixed the accounting issue and resubmitted a capital plan in May, and the WSJ reports the lender is requesting the same size dividend, though the buyback plan has been toned down.
- For the bank - which has made boosting the dividend a top priority - the move projects to the Fed a sign of strength and that there are no more accounting cockroaches out there. For the Fed, its decision will establish a precedent for how these errors might be dealt with in the future.
- All this is happening as pressure mounts for BofA to come to a settlement with the DOJ over mortgages, and word is Eric Holder has no interest in talking turkey with Brian Moynihan until their lieutenants get a lot closer to a final deal.
- Shares -1.6% premarket as S&P 500 futures tumble
Thu, Jul. 10, 1:59 AM
- Eric Holder says he will not meet with BofA (BAC) CEO Brian Moynihan to discuss a settlement over the bank's mortgage lawsuit with the Justice Department, Reuters reports. The Attorney General states that the "parties remain too far apart for a meeting to be productive."
- In prior negotiations over the shoddy mortgage selling lawsuit, BofA discussed paying $12B to resolve the claims, although the Justice Department countered with a $17B settlement .
- JPMorgan Chase CEO Jamie Dimon previously cut a $13B deal with Holder regarding his bank's involvement with its mortgage selling before the financial crisis, and BofA was seeking a similar negotiation.
Wed, Jul. 9, 11:51 AM
- The bank issued $91B in private-label MBS between 2005 and 2008, say Morgan Stanley's Betsy Graseck and Manan Gosalia. That's just 20% of what JPMorgan sold and 14% of Bank of America's issuance.
- The reported $7B settlement would amount to 7.7% of Citigroup's (C -0.3%) pre-crisis issuance vs. JPMorgan's 2% settlement - this despite the fact that losses on Citi's MBS book were inline with its peer group. Nevertheless, the team notes these press rumors have been somewhat on the mark and cut their Q2 EPS estimate by $0.70 to $0.40 to account for the $4B hard-dollar amount (the other $3B is for borrower relief).
- Up next is Bank of America (BAC -0.2%), which will now see boosted pressure to reach a deal with the DOJ, and Morgan has baked in a $12B settlement, or 1.8% of the face amount of securities issued. Other press reports have suggested a number closer to $17B.
Thu, Jul. 3, 1:04 PM
- Morgan Stanley joins yesterday's bullish call on Bank of America (BAC +1.1%) from Deutsche Bank, with analysts Betsy Graseck and Manan Gosalia noting BofA is least exposed to the slowdown in activity in commodities, rates, and FX, and thus has less downside.
- Combine that with valuation - BofA sells for 8.8x 2015 EPS vs. Goldman at 9.7x, JPMorgan at 9.1x, and Citi at 9x - and expense reductions which should be better than peers, and Bank of America could be the buy of the group.
- Previously: More on Deutsche's upgrade of Bank of America
Wed, Jul. 2, 12:31 PM
- Global M&A deals in H1 totaled $1.571T, according to Mergermarket, up 56% over the same period in 2013, and up 29.8% from last year's 2nd half. in the U.S., $694.6B of deals in H1 nearly doubled that of one year prior. European deals of $453.6B gained 35.5%, and Asian deals of $286.7B rose 56.8%.
- The M&A boom could help offset at least some of the widely expected continued trading slowdown this quarter (banks begin reporting their Q2s in about 10 days), and Goldman (GS +0.1%) tops the advisor tables with $533.8B in deals in H1, up 112% from a year ago. With $495.6M (up 180.4% Y/Y), Morgan Stanley (MS +0.5%) in in 2nd place. In third place, Bank of America (BAC +2.3%) deals grew 141.7%, and in fifth place, Citigroup (C +1.5%) saw a 177.2% boost in deals. JPMorgan (JPM -1.1%) took 4th place with $324.8B in deals, but saw just a 25.3% rise.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, KBWC, FINZ
Wed, Jul. 2, 11:42 AM
- Key to analyst Matt O'Connor's upgrade of Bank of America (BAC +2.5%) is his improved outlook for fixed income trading revenue. The whole world knows about the slowdown in this segment for the big banks, and expectations can hardly get any worse.
- Following what is sure to be an ugly print for Q2 results, the year-over-year comparisons begin to get a lot easier, notes O'Connor.
- Other catalysts: An improved M&A environment, higher interest rates, an improving economy, and finally, a Republican sweep in November could prove a boon for the entire banking sector.
- Previously: BofA boosted by upgrade
Wed, Jul. 2, 7:26 AM
Mon, Jun. 30, 1:21 PM
- Bank of America (BAC +0.4%) names Jeremy Murphy a managing director in its consumer and retail investment banking unit after he exited a similar position at Barclays (BCS -1.5%).
- Barclays is in the midst of restructuring its investment banking division, and management has promised 7K job cuts by 2016. The challenge is cutting heads without cutting revenue.
Wed, Jun. 25, 4:17 PM
- It's Charlotte's biggest single bank layoff since the financial crisis as Bank of America (BAC) lets go 540 from its Legacy Asset Servicing unit in the city - roughly two-thirds of the local workforce in that division.
- At its peak in 2012, LAS employed 42K across the country, but the bank has trimmed one-third of those jobs since, alongside cuts in the number of troubled loans which need servicing.
Wed, Jun. 25, 10:04 AM
- Banks could lose up to $4.5B in annual revenue as new regulations alter how swaps are traded, according to a report from McKinsey & Co. That amount is equal to 35% of the $13B in revenue booked by banks from trading in rate derivatives, and it comes at a time when FICC business is already on the decline.
- At issue are new rules requiring swaps trade on electronic systems rather than over the phone ("Thanks, big boy"), and the greater transparency should bite into profits. To counter this, says McKinsey's Roger Rudisuli, banks will have to cut costs and realign teams to focus attention on fewer customers.
- The usual suspects make up the 5 largest U.S. swaps dealers: JPM, C, BAC, GS, and MS.
- ETFs: IAI, KCE, KBWC
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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