CrossProfit_

Bank of America: Bank on This Opportunity

Just curious...has anyone reading this article gone over the list of MER's assets? Does anyone even recall (for instance) that Merrill bought First Republic Bank (formerly FRC) just a year ago? There are other assets as well that come along with MER that BAC could only dream about getting its hands on.

BAC is not overpaying for MER, at the same time it can be said that BAC is not underpaying as well. This is why this deal will go through. The price is about right.

On the other hand, the AIG deal is an unbelievable steal for the Treasury. There you have to watch out. Whenever a deal is too good to be true, meaning that one party is partying at the expense of the other, expect the deal to either fall through, be replaced by another or renegotiated with the same parties.

CrossProfit

What B of A Gets by Passing on Lehman & Gobbling Up Merrill

Fair and balanced article.

What's the BofA / Merrill Synergy?

With $50B a year revenue (low end) and the potential to earn between $5 and $7B net per year, throw in cost savings and the price tag doesn't seem so high. EBIT is over $12B even in a bad year.

It is true that the bottom line has taken a hit for the last three quarters but that doesn't mean in a year from now, after the dust settles, that MER won't be back on track.

MER didn't want to risk going it alone like LEH and for that alone...kudos to MER management.

CrossProfit
Disclosure: No position.

Alternative Buyers for Lehman (and Not Just the Usual Suspects)

"Here is what I am hearing from my broker sources: Bank of America (BAC) will pay between $2 and $3 for Lehman"

You need new sources!

Bank of America Buyback Announcement: Who Cares?

Dusty,
What are you talking about?
"Notice of the buyback arrived a few days ago and I checked with my broker. Special large commission (relative to my personal finances), $1.50 a share back to BAC special fee, repurchase only good for the next NYSE Business Day with BAC shares listing at about $15.00."

This sounds like a scam. Send a copy of the letter by fax to the SEC with a cover letter asking "Is this a scam?"
See:
www.sec.gov/complaint....

Don't wait, just do it. You have nothing to lose and everything to gain by checking it out.
CrossProfit

Bank of America Buyback Announcement: Who Cares?

The reason this is good news is that the Board is sending a strong message to the markets that it is on top of things.

1) Outstanding buy-back authorization was reduced from 125M to 75M and the time frame extended.
2) Shows board is conserving capital yet expects to be out of the woods within the eighteen month period.
3) Shows Board sees authorization as an additional safety net regarding dividends. Board has signaled that it will cancel buyback authorization before even considering touching dividends. This gives investors a much needed 'early warning' system and Board has signaled that it is willing to 'play fair'.

The final result is that the Board has said to investors - stop listening to all the rumor mongers! We (the Board) can't predict the future but if there is a problem down the road you will be notified before it happens! As of now, we (the Board) reiterate that the sacred cow is safe.

Just a quick lesson on how to read press releases...

Bespoke,
You guys know better and the correct interpretation is not a foreign language to you. What happened? Were you out to lunch and the secretary wrote the above article? :)

CrossProfit
Disclosure: Associates long BAC.

RBC Analyst: 300 Banks Could Fail [Housing Tracker]

dixie,
Agree. With only 90 on the watch list and the analyst doesn't have any information that we don't have, RBC must be short the financial s and is getting scared with BAC and others recent recovery.

User 231288,
Cute!

CrossProfit
Disclosure: Long BAC (associates).

Mid-Year Picks and Pans From Barron's Roundtable

Noticed out of 10 picks, 5 are banks. This may be a bit early as shorts haven't cashed in yet. However, on a longer horizon it should work out. In reality picking the bottom of a bottom is pure luck.

Lately, Barron's contributors have been early on bullish calls. It might pay to wait a couple of weeks!

Goldman Sachs Raids the Cookie Jar

Stewie,

Point 1) - Not sure, will have to look it up.
Point 2) - Could be, so it backfired, big deal. All it really means is that they have to pay the tax upfront instead of deferring. In any case, they don't have to come up with the cash. But point #1 (capital) has to be looked into.

Goldman Sachs Raids the Cookie Jar

Stewie,

Thanks for the link, know that. The $5.6M is peanuts. It is the $900M, mentioned in the article that should be of concern. However, FITB deposited on account with the IRS back in 2005 most of the tax due. This means that if they lose, they don't pay the interest on the claim. If there is anything else to pay it would be a small amount. If they win, they get back $380M+(?) and interest.

Posting the full text:
During May 2005, the Bancorp filed suit in the United States District Court for the Southern District of Ohio related to a dispute with the Internal Revenue Service concerning the timing of deductions associated with certain leveraged lease transactions in its 1997 tax return. The Internal Revenue Service has also proposed adjustments to the tax effects of certain leveraged lease transactions in subsequent tax return years. The proposed adjustments, including penalties, relate to the Bancorp's portfolio of lease-in lease-out transactions, service contract leases and qualified technology equipment leases with both domestic and foreign municipalities. The Bancorp is challenging the Internal Revenue Service's proposed treatment of all of these leasing transactions. The Bancorp's
original net investment in these leases totaled approximately $900 million. The Bancorp continues to believe that its treatment of these leveraged leases was appropriate and in compliance with applicable tax law and regulations. While management cannot predict with certainty the result of the suit, given the tax treatment of these transactions has been challenged by the Internal Revenue Service, the Bancorp believes a resolution may involve a projected change in the timing of the leveraged lease cash flows.

Recently issued FSP FAS 13-2, which was effective as of January 1, 2007, mandates that a change or projected change in the timing of lessor cash flows related to income taxes generated by leveraged lease transactions, excluding interest and penalty assessments, will
require a lessor to recalculate the rate of return and allocation of income to positive investment years from inception of the lease.

Upon adoption of FSP FAS 13-2 on January 1, 2007, the Bancorp recorded a $96 million after-tax charge to retained earnings related to its portfolio of leveraged leases. The amount of this reduction will be recognized as income over the remaining term of the affected leases.

During the first quarter of 2007, the Bancorp made deposits of $386 million with the IRS to mitigate the risk associated with tax years
currently under audit. These deposits enable the Bancorp to stop the accrual of interest on any tax deficiency, to the extent of the deposit, if the Bancorp is not ultimately successful.

Oppenheimer's Whitney Dines with BofA’s Chief; Rates Stock a "Perform"

This is a recurring theme with all analysts. While sitting at our desks we tend to believe that we know it all and our understanding of the situation is complete.
Once we get out and start talking to people we then realize that no one thinks of all the angles of a very complex situation. Even what appears to be a simple business has many attributes composing the entire business scene.
For every negative there is a positive and it is the analyst's job to understand both sides of the coin before committing to an unwaivering position.
Mrs. Whitney should have known better. We are NOT saying this because of Whitney's change of heart. We've been saying this all along. As an Oppenheimer analyst, we expected her to share some of her research on which she based her previous conclusions. This wasn't forthcoming and though one original call was dead on we began to suspect subsequent spill-over analytical dirge was in play.
Better late than never. Congrats Whitney.

CrossProfit

Will the Dollar Recovery Launch a Bank Rally?

Nice article.

This is an interesting observation:
"Abbey/Santander is now a top 3 UK mortgage lender precisely because as a Eurozone domiciled bank it has access to the ECB funding window at 4% and can make huge profits lending competitively in the dysfunctional UK market."

Thanks again.
CrossProfit

Dividend Analysis: Bank of America Corp.

No need to send emails, thank you.

You can read about the MarketWatch article here:
www.crossprofit.com/ar...

CrossProfit

Dividend Analysis: Bank of America Corp.

"I would likely add some shares just to lock in a 7+% dividend yield."

Similar conclusion in this article:
seekingalpha.com/artic...

Long term, BAC should work out just fine. Just add slowly to existing long position. Every dollar down, add 5% to position (i.e. from 10000 shares to 10500). From 35.60 to 33.60, position should be 110%. If BAC does hit 26.60 (?), new position would be 145% of original position - with average yield over 8.2%! Eventually, BAC is back over 40 again.

With all the bank bashing going on there is no way of knowing where the bottom is. The bank bashers' must have loved the LEH scare today. Last week it was IMB's turn to have materially false information disseminated by MarketWatch. One wonders, who's next?

CrossProfit (consensus)

These 32 Commercial Banks and Thrifts May See the Dung Hit the Fan

Reggie,

In 2006 the FDIC had 50 banks on its watch list and 3 defaulted in 2007. In 2007 the FDIC had 76 banks and institutions on its watch list. It doesn't mean that all 76 will default. In fact, most won't as there are numerous solutions before forcing a closure. This is out of over 8,000 banks/institutions/thr... etc., that are supervised by the FDIC. Keeping things in perspective is very important.

The FDIC does NOT disclose the names of the banks that are on its watch list. However, there are five private companies that list and grade banks in an effort to emulate the FDIC standards.

One free service, yet considered less reliable, can be found here:
www.bauerfinancial.com...

The free 'star rating' is what you are looking at. The additional reports for a fee you can compile on your own...buy one and see how they do it etc.

Good luck,
Saul Sterman
CrossProfit