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jclyak

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  • A Tale Of 2 Banks: Pondering Wells Fargo And Bank Of America [View article]
    Ernie, not only is there a strike price reduction for dividends, but there is also an increase in the number of shares for which the warrants are exerciseable. The value of this is more than the strike price reduction. That said, I have only WFC and Jpm warrants, BAC and its warrants in particular are a bit rich compared to the others...in the abstract though (cared to the S&P in general, all banks and warrants are dirt cheap...other than C warrants
    Apr 26, 2015. 10:53 AM | 1 Like Like |Link to Comment
  • A Tale Of 2 Banks: Pondering Wells Fargo And Bank Of America [View article]
    As usual Ray, well written. I gave up on BAC after last Q was reported. I'm now
    2/3rds in JPM and 1/3rd in Wells. The endgame for BAC as an investment thesis is to have it exploit its great assets in some semblance of the manner that JPM and Wells currently exploit theirs.

    My problem with this is that even if BAC earns $5.5 bil./q in a couple of years (a very big "if"), it will end up with a p/e of 10 for a while and that puts it at $20/share. Jpm has a current run rate of nearly $6.40/yr absent litigation and plus lowered expenses. I might as well own something with present metrics that BAC is aspiring to, and may or may not achieve, several years out...again a big "if."

    That said, I love all the huge banks. They will all have a massive tailwind as rates increase and the economy improves...thus BAC is a great secondary position, with a different thesis...I just tired of the wait.
    Apr 23, 2015. 10:27 AM | 3 Likes Like |Link to Comment
  • JPMorgan Chase: Thesis Playing Out [View article]
    I just dumped my Bac holding, which was 50% of my Jpm (warrants) and added that to Jpm. Both Jpm and wells are rapidly growing and Bac still seems to be in some sort of triage mode. I just can't wait any longer for Bac to exploit its great assets...maybe in a couple more q's?
    Apr 15, 2015. 03:06 PM | 1 Like Like |Link to Comment
  • Wells Fargo Is Always Difficult To Buy Because It Is Great [View article]
    Sorry, I show my work.
    Apr 2, 2015. 02:06 PM | Likes Like |Link to Comment
  • Wells Fargo Is Always Difficult To Buy Because It Is Great [View article]
    At a pe of 13.16 post tax, wells has a major buyer that will be guaranteed a return of 11% pre tax, Wells itself. That beats the hell out of its NIM on loans. They will buy a ton this year.
    Apr 2, 2015. 03:54 AM | 1 Like Like |Link to Comment
  • The Advantages Of Finding Dividend Growth Early [View article]
    Thanks investor psyche. Your thoughts are reasoned and concise.

    I really could care less about the continued chorus (noise) looking at a grim history re. Bac. The company is an example of destructive governance..historically. I merely suggest that you look at their assets and decide whether historic management can be improved upon...significantly. If not, I doubt the prospects for survival of the human race.

    My normalized valuation of BAC assumes the Vacaville inmates will no longer run the show and typical 91.4 IQ bankers will take over. In fact, I give the present BAC mgmt. much more credit than this. I like them.

    My whole point is that BAC, along with the other banks will have enormous earnings and capital...and if you read between the lines of John Stumpf at Wells, the banks will do just fine, inspite of our ridiculous regulatory regime.
    Mar 23, 2015. 10:48 AM | 3 Likes Like |Link to Comment
  • The Advantages Of Finding Dividend Growth Early [View article]
    Investor Psyche, BAC is going to have capital coming out of its ears as it amortizes its $30 bil. DTA over the next 3 years and earns $20 bil. on avg. (IMHO)

    it also has quite adequate capital right now per ccar. At March of 2016 it will have at least $19 bil. more, unless interest rates increase 100 bp in the next few months, in which case BAC will have $23 bil. + added capital for 2016 returns.

    My point really didn't relate to basel cap (a detail), it has to do with the quality and amount of its assets....those I mentioned. If deployed with some semblance of Wells or JPM skill, BAC should make as much, or a lot more than those two (especially Wells).
    Mar 22, 2015. 10:22 PM | 4 Likes Like |Link to Comment
  • The Advantages Of Finding Dividend Growth Early [View article]
    Greg T, I keep looking at the components of the big bank's balance sheets to project future income. Bac simply has much better assets than Wells. I believe this will sooner or later yield income parity with Wells, if not considerably better BAC income in future years.

    For example, the BAC credit card portfolio yields an annual income advantage approaching $6 bil. I'd take Merrill/Us Trust over Wachovia securities by a long shot as well.

    Mind you, I have Jpm and wells too (as much or more than BAC), but I think BAC presents much more income, buyback and dividend leverage for the next 3 years.
    Mar 22, 2015. 08:26 PM | 3 Likes Like |Link to Comment
  • Bank Of America - An Ironic Opportunity For Superior Appreciation [View article]
    You know Markos, I have about equal weighting of wells and Bac and about 60% more Jpm (all warrants). I keep a/b-ing wells and BAC. Interestingly BAC has more assets and better assets than wells, yet all revenues are about 17% less. For example BAC has an $87 bil. Credit card portfolio yielding near 10% net, compared to Wells $27 bil. Yielding 11%. This ought to give BAC a $1.5 bil quarterly NII head start. No? Otherwise wells has an extra $40 bil. Of loans. Net wells beats BAC by close to $2 bil./q of NII. Hummmm.

    Likewise, BAC has Merrill, Us Trust and other far mor significant iB, wealth mgmt and trading assets than Wells, yet wells kicks BAC on other income. Hmmmm?

    Wells kicks on non-interest expense too, like 18% less.
    I'm not sure why I own so much BAC? Lol. I'm hoping it will sooner (or later) start acting like wells...I believe sooner?

    Any thoughts?
    Mar 21, 2015. 12:00 AM | Likes Like |Link to Comment
  • JPMorgan: A Premium Firm At A Standard Price [View article]
    I normally like the use of dcf (yours included) to value a company or industry niche. I just happen to believe, as your article stresses, that the value of the big banks (and many smaller ones at this ten seconds) is more external event driven than typical, rendering dcf sort of irrelevant.

    In the last 24 months the top 10 banks have lost 52 bps of NIM. In the past 48 months that number is 83 bps. During both periods the fed funds rate was at flat zero. Thus run-off of higher yielding assets and a flatline economy caused the ratable decline. http://bit.ly/1H1EfDw

    You might like this

    Compared to "normal," NIM is down about 140 bps. I believe that with a return to a growth economy, that is underway, and loan growth that is underway, yields, loan balances and NIM will revert to the norm. From a yield standpoint, about 250 bps on all durations will pretty much do the trick because thereafter the cost of funds starts to increase rateably.

    Just run a 100 bps NIM norm reversion for JPM and it adds $20+ bil. annually pre-tax. That's $3+ added per share net income. I'd say NIM reversion is the next shoe to drop for all banks. It is a total game changer and it will happen much more quickly than the slow bleed dropping JPM's NIM to the present 2.35%

    Note an added kicker for those who argue historic NIM's are a thing of the past, the banks now have twice as much capital as historically and the cost of that capital is zero.

    In short, NIM reversion from loan growth and rate increases will blow everyone's mind over the next two-three years and those who ride the big banks are in for something approaching a double. (A quad with TARP warrants) here is a nice 4 minute video on the warrants and Jpm.

    http://bit.ly/1H1IH5b
    Mar 19, 2015. 04:49 AM | 1 Like Like |Link to Comment
  • Bank Of America - An Ironic Opportunity For Superior Appreciation [View article]
    Nice article...a couple of tidbits:

    NiM and NII . BAC seems to downplay the effects of short/long rate increases on net interest income, as do the other big banks. Bac claims that for each cross-the-board 100 bp increase, they'll pick up $3 bil. of interest income. BAC is sitting on $403 bil. of non-interest bearing deposits. Logic tells me that BAC will pick up $4 bil. on that alone. I'm thinking the first 100 basis points will drop something closer to $7 bil. of interest income annually.

    I keep harping on this, but that tax asset...oh that tax asset. By 2016 ccar time BAC will have something on the order of $19 bil. of added tangible equity if it nets $16.5 bil. in 2015. (16.5 bil. income + $8.25 bil. of taxes that don't have to be paid - $6.25 bil. of dividends and repurchases). Think about what their payout will be in 2016 if this comes true? Overlay another $5-7 bil. of NII (with no taxes)...yummy. No?
    Mar 16, 2015. 10:50 PM | 4 Likes Like |Link to Comment
  • Bank Of America: The Best Bank To Buy For The Next 5 Years? [View article]
    The math is a bit convoluted, but here is a link to a great article on the topic Jhearn. http://bit.ly/1AkCGvu
    Mar 11, 2015. 04:11 PM | Likes Like |Link to Comment
  • Bank Of America: The Best Bank To Buy For The Next 5 Years? [View article]
    Me too. Have jpmws and Wfcws as well. The warrants will get really intriguing when the dividends go up. At $.10/q the strike price reduction is around $.18/q (back of napkin..because of the dilution allowance the Feds extracted under TARP). Multiply that times 16 Q's and you knock $2.88 off the strike. The present adjusted strike is about $13.18-$2.88 it is at $10.30..they are almost selling at a discount. Now, let's get real, dividends will average closer to $.20/q over the next 16 quarters and the strike price reduction will be closer to $5.50. You get the warrants for $.70 net (absent TVM adjustment).

    BAC makes $16 bil. Next year and it pockets $24 bil. (Because of deferred tax asset...like $28 bil. Nol) That's a lot of marbles to pay dividends and repurchase in 2015-18. I'm counting on the stock hitting $30 and my having an option at $7 and change. On an investment of $6.13?...in Warren's parlance, "the numbers get rather interesting."
    Mar 10, 2015. 06:46 AM | 5 Likes Like |Link to Comment
  • Bank Of America: Embrace The Latest Regulatory Issue [View article]
    Nice article. You are absolutely right, $16.5 billion settlement is one thing...this is nothing. Your take that the financial press is at the bottom of the barrel is correct IMHO.

    I wonder what the difference in net profit on the loans would have been if made outside the govt. insured pool..probably not far off the same...I wish the tobacco companies were still in hot water, maybe the wsj would have something better to write about?

    Thanks again...btw, I love the big banks
    Feb 14, 2015. 08:01 PM | 3 Likes Like |Link to Comment
  • Bank Of America And Mr. Moynihan Continue To Disappoint [View article]
    I started dabbling in BAC in 2011, a bit before Buffett got in. I believe the author needs to delve into recent history, facts, the macro/micro economic conditions of the banking industry, the government hostility, including litigation and the Ken Lewis legacy before condemning Moynihan as anything less than a magician for putting BAC where it is today.

    Mr. Mason, perhaps you remember the Buffett infusion. Sure it was a great deal for Buffett. It was a better deal for the bank. I believe BAC was on the edge of a run and collapse at the time...very close to that edge. Moynihan made a provocative, bank-saving move in partnering with Buffett..yes, he saved the bank.

    Lewis bought everything in sight at very bad prices, either too high...Merrill, or any price at all..Countrywide. In the latter purchase, Lewis totally failed in due deligence and in protecting BAC from the lack of due deligence...costing the bank $50+ billion over and above the cost of a horrid economy.

    Speaking of the economy, Moynihan inherited a situation that was critical. The value of collateral had precipitously dropped (Moynihan's fault?), lending activity disappeared for years, interest rate spreads dropped to 0, litigation and regulation increased, increased...

    Speaking of regulation, the bank along with all others have been forced to add huge amounts of capital (while paying huge fines), liquidity and 0% interest and write off enormous amounts of loans by government mandate and because of the economy. Mr. Mason, any one of the above mentioned items could have dearly inhibited the profitability of BAC, or any bank. Taken together, they should have been fatal, but for the efforts of Moynihan.

    Mr. Mason, if you were managing $2.1 trillion of money derived from depositors, creditors and shareholders who wanted it managed carefully along with a government that was mandating vast improvements in liquidity..ie. short maturity, extremely safe assets...ie. 30 day or less treasuries, what would you do? What would you do to in order to increase profitability and "show a vision?" Can you imagine what the cumlulative effect of massive liquidity requirements, capital, litigation, regulation and a no-loan/no-interest rate economy have had on this bank? Not to mention cleaning up the tangled mess Lewis left in an otherwise dreadful environment.

    Mr. Mason, perhaps you are correct that Mr. Moynihan does not possess the vision to guide the bank forward in a "normal" environment. Maybe we ought to wait for a normal environment to happen before making that judgment. Interest rates are rotten, loan/economic growth is still tepid, regulations are still growing. BAC is still fresh off of a $16.5 billion settlement which seems to be the last significant one.

    It just seems like declaring Moynihan to lack the vision is like declaring a person suffering snow-blindness in a 100 year blizzard to be permantly, irrefutably blind 10 minutes after the sun comes out and prior to an eye exam. Cut the man a little slack, will ya?
    Jan 17, 2015. 09:54 PM | 5 Likes Like |Link to Comment
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