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%.
Apr. 16, 2014, 7:23 AM
- Adjusted EPS of $0.35 compares to estimates of $0.27, with the $6B settlement weighing on the headline EPS loss of $0.05.
- Net interest income of $10.3B fell 5% Y/Y, with NIM of 2.36% up six basis points. Noninterest income of $12.5B is flat from last year, with lower mortgage banking income and trading profits offset by increases in investment and brokerage income, equity investment income and gains on the sale of debt securities.
- Provision for credit losses of $1B is down 41%. Net charge-offs of $1.4B down 45%, with net charge-off ratio of 0.62% comparing to 1.14% a year ago. Reserve release of $379M vs. $804M a year ago.
- Noninterest expense of $22.2B is up from $19.5B a year ago, with higher mortgage litigation costs ($6B vs. $2.2B) partly offset by cuts in Legacy Assets and Servicing (LAS). Excluding litigation, expenses fell $1.2B Y/Y.
- Other highlights: Mobile banking customers up 19% to 15M - more than 10% of deposits now done through mobile; first mortgage originations fell 65% Y/Y, with production revenue of $273M comparing to $815M a year ago; Wealth Management net income of $729M vs. $721M a year ago.
- Basel III Common equity ratio of 11.8% up from 11.7% at 2013's end. Tangible book value per share of $13.81 up $0.02 from year's end and from $13.36 one year ago.
- CC live on Seeking Alpha at 8:30
- Press release, Q1 results
- BAC flat premarket in active action
Mar. 24, 2014, 2:54 PM
- Noting Bank of America's (BAC -0.9%) capital ratio in the Fed stress test was the lowest of any bank which passed, Atlantic Equities pulls its Overweight rating on the stock, and cuts the price target to $18.50 from $20. The stress test, says analyst Richard Staite, shows BofA with a $13B buffer over the minimum requirement, meaning maybe just $5B in buybacks and $2.5B dividends this year, "although we are somewhat nervous that it or another bank could be failed on a qualitative basis."
- Still, Staite expects a boost in the quarterly payout to $0.06 per share from a penny.
- Staite and team upgrade U.S. Bancorp (USB +0.7%) and Wells Fargo (WFC -0.4%) to Neutral from Underweight, citing the large margins by which they passed the stress test.
- In other financial sector moves, Sterne Agee boosts First Interstate BancSystem (FIBK +6%) to a Buy, citing the benefits of its impending merger with Mountain West Financial. The team also lifts EverBank Financial (EVER +2.4%) to a Buy from Neutral.
Mar. 20, 2014, 10:54 AM
- Much of the financial sector is lit up bright green, continuing to outperform following yesterday's suggestion by the FOMC and Janet Yellen that rate hikes could come sooner than expected. XLF +1.1%, KBE +1.6%, KRE +1.6%.
- At new 52-week or even multi-year highs are JPMorgan (JPM +2.3%), Wells Fargo (WFC +1.7%), Morgan Stanley (MS +1.4%), and Bank of America (BAC +1.6%).
- Regional lenders: U.S. Bancorp (USB +1%), Huntington (HBAN +1.5%), PNC (PNC +1.3%), BB&T (BBT +1.5%), Fifth Third (FITB +1.8%), First Niagara (FNFG +2.1%).
- Leading among the life insurers are Lincoln National (LNC +1.9%), Protective Life (PL +1.6%), Manulife (MFC +1.2%), and Sun Life (SLF +1.1%).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, SEF, IYG, IAK, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KRU, RWW, KBWR, RYF, PSCF, KBWI, KBWP, KRS, FINZ
Mar. 19, 2014, 3:13 PM
- A check of sectors following the FOMC statement and updated projections suggesting a quickened pace of rate hikes in the future finds the banks and life insurers notably moving higher. Both groups have struggled earning a spread amid ZIRP and are positively levered to higher rates.
- Lenders: Bank of America (BAC +1%), Citigroup (C +1%), JPMorgan (JPM), Regions (RF +1.7%), KeyCorp (KEY +0.9%), SunTrust (STI +0.7%).
- Life insurers: MetLife (MET +1%), Prudential (PRU +0.7%), Lincoln National (LNC +1%).
- Related ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, KIE, SEF, IYG, IAK, FXO, PFI, KBWB, FNCL, FINU, RWW, RYF, PSCF, KBWP, KBWI, FINZ, KBE, KRE
- Not necessarily positively levered to higher rates are the mortgage REITs (REM -1.6%): Annaly (NLY -1.8%), American Capital (AGNC -1.7%), (MTGE -1.9%), Armour (ARR -1.3%), Two Harbors (TWO -2%) CYS Investments (CYS -3.3%), Capstead (CMO -1.3%), MFA (MFA -1.8%).
- Related ETFs: MORT, MORL
Mar. 5, 2014, 3:42 PM
- Buying the rumor? On a flattish day for the major averages, the Too Big To Fail banks are ignoring a continued slowdown in markets revenue this quarter, and instead partying ahead of what may be the imminent release of the Fed's stress test results (perhaps Friday). About one week later will be CCAR results at which the Fed gives the thumbs up or thumbs down on the banks' capital return plans.
- Word is the tests are tougher this year, but bank capital levels are also improved.
- Leading today is Bank of America (BAC +3%) - now within about one percent of a 4-year high. Others: Morgan Stanley (MS +2.8%), Goldman Sachs (GS +1.8%), Ciitgroup (C +1%), JPMorgan (JPM +1.5%), and Wells Fargo (WFC +0.6%).
- Also subject to the stress tests are a number of regional lenders, not to mention credit card players - they're mixed in today's action.
- Related ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAI, IAT, SEF, IYG, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KCE, KRU, RWW, KBWR, RYF, PSCF, KRS, FINZ, KBWC
Jan. 31, 2014, 12:14 PM| 25 Comments
Jan. 15, 2014, 9:03 AM
- "We still have not approached the true earnings potential of Bank of America (BAC)," says CEO Brian Moynihan, leading off the earnings call. The bank reported EPS of $0.29, beating estimates for $0.26, but adjusting for DVA, litigation, and the artificially low tax rate brings core EPS up to $0.42, notes Hedgeye's Josh Steiner.
- CC webcast and presentation slides
- Declining to answer a question about the Fed stress tests and BofA's capital return plans (will the nominal $0.01 dividend be hiked this year), CFO Bruce Thompson notes the bank's Tier 1 common capital ratio is around 9%, higher than the proposed 8.5% minimum which doesn't take effect until 2019.
- The bank cut 5,826 jobs in Q4 - with the cuts coming in branches and mortgage servicing/origination.
- Goldman Sachs (GS) and Morgan Stanley (MS) investors take note: BofA's FICC revenue of $2.1B jumped 16% Y/Y. JPMorgan yesterday reported a 1% Y/Y gain vs. expectations for an 11% decline. The Street expects Goldman to report a 23% decline (after Q3's 44% tumble) and Morgan Stanley an 8% increase. Is a positive surprise looming?
- BAC +2.9% premarket to $17.25, the highest price in nearly 4 years.
Jan. 15, 2014, 7:21 AM
- Net interest income of $11B, up 4% Y/Y, with net interest margin growing to 2.56% from 2.35% a year ago.
- Noninterest income of $10.7B, up 28% Y/Y, thanks to lower provisions for reps and warranties, and improvement in investment banking and brokerage income (global wealth management income of $777M, up 35%). Credit loss provisions of $336M are $1.9B lower than a year ago. Net charge offs of $1.6B in the Q compare to $3.1B a year ago.
- Expense cutting remains on track: Noninterest expense of $17.3B is down 6% Y/Y, thanks to job cuts in Legacy Assets and Servicing (LAS). Full-time equivalent employees fall 9% in 2013 to 242K. This was offset by litigation expenses rising to $2.3B in Q4 from $1.1B in Q3 and $916M a year ago.
- Like with Wells Fargo and JPMorgan, mortgage business continues to disappear, with first-mortgage originations falling 46% Y/Y and core production revenue falling to $403M from $986M. The difference - at least as far as with Wells Fargo - is the mortgage business makes up for a far smaller chunk of BAC's business.
- CC at 8:30 ET
- Press release, Q4 results
- BAC +2% premarket
Jan. 3, 2014, 10:16 AM
- Bank of America (BAC +2.2%) tacks more onto yesterday 3.4% move, touching its highest level in nearly three years.
- Yesterday's catalyst looked to be an upgrade from Citi, but that report added little to the widely-known bull case on BofA. Perhaps a favorable ruling on the bank's Article 77 hearing - in which a judge can uphold or throw out BofA's $8.5B mortgage settlement with investors - is at hand.
- The Bank of America Tarp Warrants (A-series) - struck at $13.30 and expiring in January 2019 - are higher by 2.9% to $6.90.
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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