Oct. 23, 2014, 6:01 PM
Oct. 23, 2014, 4:49 PM
- Not having had the pleasure of being subject to the stress test and CCAR previously, Deutsche Bank's (NYSE:DB) U.S. unit will be a participant next year
- As in prior years, those BHCs with large trading operations - BAC, C, GS, JPM, MS, WFC - will be required to factor in a global market shock as part of their scenarios.
- Those six, plus STT and BK - thanks to their custodial operations - will be required to incorporate a counterparty default scenario.
- Among the items in the severely adverse scenario is the unemployment rate jumping to 10%, a 60% dive in the stock market, and oil jumping to $110 per barrel (how about oil falling to $10 per barrel?).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, IAI, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KCE, KRU, KBWR, RWW, RYF, KBWC, FINZ, KRS
Oct. 22, 2014, 10:32 AM
- The MBA index rose 11.6% for the week ended October 17, the largest gain since January as mortgage rates continued to decline - the average 30-year fixed mortgage coming in at 4.1%, the lowest since May 2013.
- Leading the way were refinancings, with that gauge jumping 23.3%, the biggest move since January 2012 (purchase applications fell 4.6%).
- Should the trend continue, the now-lean mortgage operations at places like Wells Fargo (WFC +0.2%), JPMorgan (JPM +0.2%), and Bank of America (BAC +0.2%), among others, should provide a nice boost to Q4 results.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, KBWR, RWW, RYF, FINZ, KRS
Oct. 16, 2014, 7:08 AM
- "Given drastically reduced litigation expenses going forward, we think the core earnings power of the company should begin to accrete to existing shareholders, allowing book value growth at a company that has struggled to grow TBV since the crisis," says FBR's Paul Miller, upgrading Bank of America (NYSE:BAC) to Outperform, with price target lifted to $20 from $18.
- On target cost savings, he says, has proven management's ability to execute its strategy to improve shareholder returns, and he sees the possibility for 2015 EPS to exceed his $1.60 estimate.
- Previous earnings coverage
- Shares -1.8% premarket as broad markets are set for another tough day.
Oct. 15, 2014, 10:49 AM
- Bank earnings models will no doubt need to be tweaked as the sure thing of higher rates becomes somewhat less sure, with the 10-year U.S. Treasury yield plunging all the way down to 2%, and 30-day Fed Funds futures - just weeks ago pricing in 100% chance of a rate hike by June 2015 - now sees no move until December 2015.
- The XLF is lower by 1.9% and the Regional Banking ETF (NYSEARCA:KRE) is down 2.1% (the S&P 500 is off a mere 1.1%). Among individual names, KeyCorp (KEY -6.4%), First Bancorp (FBP -6.4%), Regions Financial (RF -4%), U.S. Bancorp (USB -2.2%), Fifth Third (FITB -2.6%), Bank of America (BAC -4%), Citigroup (C -3.3%), JPMorgan (JPM -2.8%), Wells Fargo (WFC -1.9%).
- Financial ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, RWW, KBWR, RYF, FINZ, KRS
- Life insurers were also waiting on higher rates and they're slipping more than the averages as well. MetLife (MET -3.7%), Prudential (PRU -2.9%), Manulife (MFC -3.5%) Sun Life (SLF -3.4%), Lincoln Financial (LNC -3.9%).
- Insurance ETFs: KIE, IAK, KBWP, KBWI
- Previously: BofA call: Assumption about higher rates not so sure anymore
Oct. 15, 2014, 9:29 AM
- We listen to what the market is telling us, says Bank of America (NYSE:BAC) management on the earnings call, responding to a question from Mike Mayo about whether the bank is changing its interest rate assumptions given the sharp drop in yields of late (the 10-year Treasury yield is now down a whopping 17 bps today to 2.03%).
- Webcast live and recorded (later) in available on Seeking Alpha.
- Presentation slides
- Getting into more detail, Mayo asks what would happen to the bank's earnings and ROE targets in 2015 if, in fact, rates do not go higher. CEO Moynihan: We'll do what we're doing now - that is trying to grow the business where it can. He notes core earnings in Consumer & Business Banking rose 15% from a year ago, Wealth Management up 3%, Global Banking up 8%, and Global Markets up 10%.
- Previously: Bank of America +1.2% after earnings beat
- Previously: Treasury yields tumble after weak data; S&P futures down 1%
- Shares now lower by 1.8% as the broader markets tumble again.
Oct. 15, 2014, 7:22 AM
- Net income of $168M includes a $5.3B or $0.43 per share pre-tax legal charge for global mortgage settlement. Earnings one year ago were $2.5B, or $0.20 per share.
- Net interest income of $10.4B flat from a year ago.
- Noninterest income gained 2% Y/Y, when excluding DVA adjustments. Net charge-offs of $1B fell 38%. Net charge-off ratio of 0.46 compares to 0.73 one year ago.
- Noninterest expense of $19.7B vs. $16.4B a year ago. Excluding litigation expense, noninterest expense of $14.2B fell 7% Y/Y, thanks to sizable personnel cutbacks (mostly in legacy mortgage).
- Consumer and Business Banking net income of $1.856B vs. $1.787B a year ago. Average deposit balances up 4%. Mobile banking customers up 15% to 16.1M - 11% of deposits were made via mobile vs. 8% a year ago.
- Consumer Real Estate Services net loss of $5.184B vs. loss of $990M a year ago, thanks to the mortgage settlement. $11.7B of mortgages originated and $3.2B of home-equity loans vs. $22.6B and $1.8B a year ago.
- Global Wealth and Investment Management net income of $813M vs. $720M a year ago.
- Global Banking net income of $1.414B vs. $1.137B a year ago.
- Global Markets net income of $769M vs. a loss of $875M a year ago. FICC revenue of $2.2B gains 11% Y/Y, driven by currencies as volatility returned late in the quarter.
- Tangible book value per share of $14.13 vs. $13.62 one year ago.
- Conference call at 8:30 ET
- Previously: Bank of America beats by $0.08, beats on revenue
- BAC +1.2% premarket
Oct. 15, 2014, 7:08 AM
Oct. 14, 2014, 5:30 PM
Oct. 14, 2014, 3:31 PM
- Global growth, foreign-exchange, oil, and small caps are the subject of every client inquiry, says David Kostin. His team's recommendation: Buy "American exceptionalism."
- In Kostin's view, U.S. economy and corporate fundamentals are still strong, with economic growth expected by Goldman economists to be 3.2% next year, the fastest expansion since 2005. Europe is expected to grow just 1%.
- What his team likes are those stocks of companies which have a high proportion of domestic sales, plus sectors like Consumer Staples (XLP -0.1%) and Discretionary (XLY +0.7%) which stand to benefit from lower oil prices (plunging again today).
- As for small caps (IWM +0.9%), Kostin is wary, noting downward earnings revisions have boosted small cap P/E ratios even as prices have declined.
- The list of S&P 500 names capturing two or more of Kostin's themes: GT, GM, PCLN, AMZN, CMCSA, LOW, DG, TSN, ADM, CVS, AVP, WAG, PXD, HAL, JPM, BAC, SCHW, PNC, MS, C, GNW, LNC, MET, THC, AET, UNH, ESRX, HUM, WLP, BIIB, GILD, DAL, CMI, FLR, CRM, JBL, MA, FB, MU, FSLR, VMC, MON, T.
Oct. 10, 2014, 2:37 PM
- "Steadily improving economic and capital markets backdrop will drive investment banking and loan growth higher, while trading is likely to rebound as the extended period of low volume and volatility is starting to shift back toward more normal conditions in September," say MKM's David Trone and Pankaj Chitrakar, expecting to see earnings for five bulge-bracket banks higher by 11% in Q3.
- The team remains bullish on all five, but sees just four - Citigroup (C -0.9%), Bank of America (BAC +0.5%), Goldman Sachs (GS +0.5%), and Morgan Stanley (MS +0.4%) - beating estimates. JPMorgan (JPM +0.3%) should just meet the $1.38 EPS consensus, they say, with strength in investment banking offset by declining mortgage banking.
Oct. 10, 2014, 12:52 PM
- The banking industry is very close to resolving too big to fail, says Jamie Dimon (JPM +0.6%), speaking publicly for the first time since his cancer diagnosis (other than his July earnings call appearance). He's appearing at a conference roundtable alongside Morgan Stanley's (MS +0.8%) James Gorman, Deutsche's (DB -0.9%) Anshu Jain, and Bank of America's (BAC +0.7%) Brian Moynihan.
- Webcast here
- The most pointed remarks so far come from Deutsche's Jain, who tells those who would continue to further strangle the banks with more regulation to look to Europe. Straightforward banking - taking deposits and making loans - is far more the norm there then here, he says, and the forcing of banks to trim businesses and balance sheets is a large contributor to the Continent's stagnant growth.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, IAI, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KCE, KRU, KBWR, RWW, RYF, KBWC, KRS, FINZ
Oct. 8, 2014, 3:22 PM
- Bank of America (BAC +0.8%) reportedly has agreed to provide inventory and working capital financing to the biggest oil refinery on the East Coast, replacing JPMorgan Chase (JPM +1.3%) with a revamped arrangement that excludes physical supplies.
- The agreement with Philadelphia Energy Solutions gives BofA's commodities business one of the biggest such financing arrangements in the U.S., but excludes the physical oil trading and logistics operations that were part of the JPM deal.
- PES, a joint venture of Carlyle Group (NASDAQ:CG) and Sunoco, had been seeking greater logistical flexibility that would allow it to take more control over its crude supply and product sales with a financier that would not compete in the trading space.
Oct. 8, 2014, 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,
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
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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