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. 9, 2014, 12:24 PM
- The Fed intends to impose a capital surcharge on banks tougher than the international standard, according to Fed Governor Daniel Tarullo's prepared remarks for the Senate Banking Committee. Those banks with heavier reliance on short-term funding like overnight loans - i.e. Goldman Sachs (GS -1%) and Morgan Stanley (MS -1.8%) - will likely face even more rigorous requirements.
- Officials haven't yet decided on a number, but reportedly are considering as much as 200 basis points more than the top range of 2.5% of risk-weighted assets agreed to by international regulators.
- What's not yet clear is who would need to raise capital to meet the new, tougher standard.
- Citigroup (C -1%), Bank of America (BAC -0.6%), JPMorgan (JPM -1.3%), Wells Fargo (WFC -0.4%), State Street (STT -1.1%), Bank of New York Mellon (BK -0.9%)
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, KBWC, FINZ
Sep. 8, 2014, 8:41 AM
- "The major catalyst for shares in our opinion is the resolution of the bulk of Bank of America's (NYSE:BAC) legal issues with its AG settlement," says analyst Richard Ramsden, upgrading to a Buy with price target lifted to $19 from $17.
- "Legal costs have obscured much of the fundamental improvement at BAC."
- Shares +1.1% premarket
Aug. 21, 2014, 2:51 PM
- "We can start to see how [Brian Moynihan] can start running the company for shareholders and not litigants," says analyst Marty Mosby following Bank of America's (BAC +3.8%) $16.65B mortgage settlement with the government.
- The removal of the legal overhang is nice as is today's rally, says portfolio manager Dave Ellison (an owner of the stock), but higher interest rates are necessary for a sustained move upward in the shares.
- "We believe they have a wonderful franchise - the question now is, 'Do they,'" says fund manager Greg Donaldson. "If they do, their earnings will move sharply up because all of their energies will be poured into making their businesses better."
- And from The Oracle - whose 700M warrants struck at $7.14, if exercised, would make Berkshire Hathaway BofA's largest shareholder? "[Moynihan] is nurturing a huge and attractive underlying business that will endure long after today's problems are forgotten," he said in his annual letter in 2012.
- Previously: Bank of America confirms U.S. deal; +1.1% premarket
Aug. 21, 2014, 9:12 AM
- Previously tipped off as being about $17B, the $16.65B comprehensive mortgage-related settlement with the DOJ and six states' Attorneys General includes a $9.65B cash payment and about $7B of consumer relief.
- The deal is expected to reduce Q3 pretax earnings by $5.3B and EPS (after tax) by about $0.43 per share.
- Source: Press Release
- BAC +1.1% premarket
- Previously: BofA reportedly settles mortgage claims for $17B
Jul. 2, 2014, 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
Jun. 6, 2014, 8:00 AM
- Bank of America (BAC) is lower by 0.5% in premarket action after last night's report suggesting the minimum tab for settling over mortgages with the DOJ and several states is $12B, with the final bill likely to surpass JPMorgan's record $13B from last year. For perspective, the bank earned $11.43B in 2013.
- At least $5B of the settlement is expected to go toward consumer relief - reducing principal amounts, cutting payments, and paying for blight removal in rough neighborhoods.
- It needs to be noted that the $12B figure is one offered by BofA, but the government is pushing for billions more. While talks have heated up in the past few days, it's still not clear when a deal may be reached.
- Previously: WSJ: BofA in talks to settle probes for $12B+
May 27, 2014, 12:09 PM
- The accounting error had zero impact on operations, says Dick Bove, and it now appears no impact on capital ratios either. Buy the stock, he says, as the higher dividend and initiation of the buyback should soon be re-approved.
- Bank of America's (BAC +3.6%) capital plan - initially approved by the Fed but then suspended following the error - was for a boost in the dividend to $0.05 per share from a penny, and a $4B buyback.
- Previously: BofA resubmits capital plan to Fed; "de minimis" effect
- In other bank news, the lender has been hired by the Sterlings to sell the L.A. Clippers, reports Bloomberg, which says the asking price could be at least $1B.
May 27, 2014, 8:00 AM
- "The third party review has been completed and resulted in additional adjustments that had a de minimis effect (less than one basis point reduction) on the Corporation’s reported regulatory capital ratios for the period ended September 30, 2013, and no effect on such ratios for the period ended March 31, 2014."
- The Fed has up to 75 days to review the resubmission.
- BAC +1.4% premarket
May 21, 2014, 2:33 PM
- The latest issue for the crusader from the NY Dept. of Financial Services is a Reuters report on Ocwen Financial (OCN -2.5%) - along with banks like PNC Financial, and Bank of America (BAC) - routinely demand homeowners promise to say bad things about them publicly in exchange for mortgage modifications.
- "Deeply troubling and offensive," Lawsky tells Reuters, promising an investigation.
- A PNC spokesperson: "These clauses are part of the consideration we receive for agreeing to settle the case. This helps to ensure that the discussion is not re-opened in public after the case has been settled."
- "When [we] take a closer look at some of these non-bank servicers, we find corners being cut, to the disadvantage of homeowners," said Lawsky in a speech yesterday, in which he makes clear his serious issues with the business models of companies like Ocwen (and affiliates like ASPS), Nationstar Mortgage (NSM -0.7%), and Walter Investment (WAC -2.4%).
May 5, 2014, 10:20 AM
- A check of the global banks finds the group pacing market declines in morning action after Friday night's warning on Q2 trading revenue from JPMorgan (JPM -2.2%).
- Nomura's Steven Chubak is first out with lower JPMorgan earnings estimates.
- Jim Cramer sums up sentiment: "This has been a house of pain. You can't own these right now. You just can't."
- Morgan Stanley (MS -1.9%), Goldman Sachs (GS -1.5%), Citigroup (C -1.2%), and Bank of America (BAC -1%), Deutsche Bank (DB -1.2%). Far less trading dependent than the other Too Big Too Fails is Wells Fargo (WFC -0.2%).
- The iShares DJ U.S. Broker-Dealer ETF (IAI -1.2%)
- XLF -0.7%, KBE -0.8%
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, PFI, FXO, FNCL, KBWB, FINU, KCE, RWW, RYF, PSCF, FINZ, KBWC
Apr. 29, 2014, 11:09 AM
- Yesterday's selloff in Bank of America (BAC +1.1%) was likely overdone in light of the bank's capital levels, says Morgan Stanley's Betsy Graseck, suggesting the end result will be BofA scrapping a buyback this year, but reinstating the dividend boost (to $0.05 per share quarterly from $0.01). CLSA's Mike Mayo, on the other hand, says the mistake raises doubt about controls, and reiterates his Sell rating.
- Goldman's Richard Ramsden says the bank likely would have failed this year's CCAR (or come very close) based on the new leverage ratios, and notes the lost capital is about equal to the amount of the buyback. At this point, even if BofA passed the CCAR quantitatively, it could fail qualitatively thanks to its accounting processes. Toss in the pending massive litigation settlement with the DOJ (which has come to light post-CCAR).
- This will be the first time the Fed has required a bank suspend its capital plan and require a resubmission mid-year, says Ramsden. "In our view this could signal a new level of oversight for banks that wish to continue returning capital when there has been a material change to their risk profile."
- Previously: Black eye: BofA suspends buyback, dividend hike
Apr. 28, 2014, 11:05 AM
- "We anticipate Bank of America (BAC -4.6%) will underperform its peers today," is the high-priced conclusion of the team at Wells Fargo after BofA is forced to suspend its capital return plans in the wake of an accounting miscalculation.
- The actual net effect on the bank's capital will not be too material, says Wells, but reputational damage, upward pressure on expenses, and the idea of a more conservative capital return request next year could weigh on the stock over the next few months (for an example, see BB&T after the 2013 CCAR).
- Wells currently has a Market Perform rating on the stock.
- Previously: Black eye: BofA suspends buyback, dividend hike
Apr. 23, 2014, 2:45 PM
- BNY Mellon (BK +2.1%) has hired Goldman Sachs to find a buyer for the unit, reports Bloomberg, and is expected to begin receiving offers in about a month. The corporate trust arm assists companies with making payments on debt they issue as well as helping customers recover funds in event of default.
- The business services about $12T in outstanding debt, with 3.5K employees at 61 global offices, but has become less lucrative since the financial crisis made the packaging and selling of loans a more difficult business. Possible buyers could be large commercial banks looking to build out their own trust business such as Bank of America (BAC), U.S. Bancorp (USB), Wells Fargo (WFC), or PNC Financial, says Guggenheim's Marty Mosby.
- On a recent earnings call, BNY management said run-off in the unit would cut annual revenue by $50M-$75M annually, roughly 0.5% of total bank revenue.
Apr. 16, 2014, 11:46 AM
- The bears, though, are winning the day, with analyst Richard Ramsden saying the stock could see pressure - a result of questions about a path to reaching 2015 and 2016 EPS estimates of $1.60 and $1.85 combining with recent outperformance (stock's beating the BKX by 500 bps YTD).
- The bulls, he says, can point to the best FICC results seen so far from the banks, rapidly declining LAS expenses, stable NIM, and strong capital and liquidity ratios.
- He maintains a Neutral rating and $18 price target on Bank of America (BAC -2.4%).
- Previous earnings coverage
Apr. 16, 2014, 9:23 AM
- "People effectively carry a branch in their pocket," says Bank of America (BAC) CEO Brian Moynihan on the earnings call (live now on Seeking Alpha), noting mobile banking customers grew 19% Y/Y to 15M and 10% of deposits now take place on mobile devices. Consumer banking costs fell 4% from last year, he notes. CFO Bruce Thompson: “We continue to reduce production staffing levels in the quarter consistent with the volumes.”
- Inquiring minds want to know more about the $2.4B boost to litigation reserves, and management is fairly tight-lipped, saying they're about addressing previously disclosed mortgage-related issues. Ambac (AMBC) shareholders looking for movement in their case against BofA may be disappointed as Thompson says the reserve increase isn't about a pending settlement with the monolines.
- Presentation slides
- Earlier BofA earnings coverage
- Just ahead of the open, shares -1.6%.
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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