mankap Posted October 1, 2013 Share Posted October 1, 2013 I think that one of the reason for the drop is that some analysts have reduced their estimates of big Bank's earnings. I saw that one analyst has reduce BAC earning estimate by $128m. I kind of started laughing as it is 1c. So they reduced BAC earning estimate by 1c. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 1, 2013 Share Posted October 1, 2013 I think that one of the reason for the drop is that some analysts have reduced their estimates of big Bank's earnings. I saw that one analyst has reduce BAC earning estimate by $128m. I kind of started laughing as it is 1c. So they reduced BAC earning estimate by 1c. I suppose 1 c quarterly reduction makes a 50 cent difference in share price at 12.5x earnings. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 1, 2013 Share Posted October 1, 2013 Interest rates came back down from their highs -- only a slight rise for Q3. Sale of China Construction Bank stake. (all of which was disallowed under B3 capital rules) 4b-5b? of capital generation (pre-tax is what matters). Are they getting close 10% B3 ratio? Link to comment Share on other sites More sharing options...
xazp Posted October 1, 2013 Share Posted October 1, 2013 Any opinions on them finally bringing Merrill into BAC (i.e. http://www.bloomberg.com/news/2013-10-01/bank-of-america-finishes-merger-of-merrill-lynch-into-parent-1-.html) ? I can't tell if that move is meaningful or not. Does it allow Merrill to have a lower cost of capital than it does presently? Is there any impact on earnings? Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 1, 2013 Share Posted October 1, 2013 I haven't been reading their financial reports that closely lately. Wow! They generated $5.7b before income tax in Q2 (less what they pay on preferreds). But they aren't paying taxes yet. They basically generated 45.6 cents of distributable cash in the quarter. So that's roughly 38 bps of Basel 3 capital generation in the quarter? Then in that case, Basel 3 ratio will be close to 11% in March after Q1 '14. Link to comment Share on other sites More sharing options...
arbcon Posted October 2, 2013 Share Posted October 2, 2013 I know the article 77 is still in progress...has anyone been tracking it? Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 2, 2013 Share Posted October 2, 2013 I know the article 77 is still in progress...has anyone been tracking it? I wasn't paying attention to it anymore. But now I'm curious. I hope there is news soon. $20 to $40 billion total settlement instead of $8.5 billion will still put the stock at $20 by the end of 2014. Last quarter they generated net income of 32 cents per share. It was 45 cents pre-tax. They aren't paying taxes for quite a while yet as they use up their past losses carried forward. The six quarters ending Dec 31, 2014 will see them generate at least $30 billion more. Take 45 cents a share for six quarters and you've got $2.70 a share. 11.5b fully diluted shares. That's $31.05 billion. Plus, I think they will generate more than $31.05 billion as they continue to improve earnings -- that number is just based on how they did last quarter and applied to the next 6 quarters. So rather conservative. Take that $31.05 billion and add in $8.5b that they've already reserved for the settlement. That takes you to roughly $40 billion. The expense reductions over the six quarter period should get the quarterly earnings closer to 50 cents. But at 12.5x earnings it would only take 40 cents a quarter to reach a $20 share price. Could be a $25 share price at 12.5x earnings if they do make it to 50 cents a quarter. There is really nothing to worry about regarding this settlement. Stock has upside to $20-$25 over next 15 months either with or without it. The uncertainty appears to be fully in the price already. Link to comment Share on other sites More sharing options...
Luke 532 Posted October 2, 2013 Share Posted October 2, 2013 I haven't been reading their financial reports that closely lately. Wow! They generated $5.7b before income tax in Q2 (less what they pay on preferreds). But they aren't paying taxes yet. They basically generated 45.6 cents of distributable cash in the quarter. So that's roughly 38 bps of Basel 3 capital generation in the quarter? Then in that case, Basel 3 ratio will be close to 11% in March after Q1 '14. Nice! Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 2, 2013 Share Posted October 2, 2013 Weak Trading, Mortgage Slump, Legal Costs to Cut Results at Banks http://online.wsj.com/article/SB10001424052702303643304579109770709313980.html?mod=WSJ_hp_LEFTWhatsNewsCollection Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 2, 2013 Share Posted October 2, 2013 Schneiderman drops his lawsuit/investigation of BofA. Instead goes after Wells Fargo. http://www.thestreet.com/story/12056412/1/new-york-ag-sues-wells-fargo-over-mortgage-settlement-violations-drops-bofa-suit.html?puc=yahoo&cm_ven=YAHOO Link to comment Share on other sites More sharing options...
mankap Posted October 2, 2013 Share Posted October 2, 2013 Moody's: BofA executes at cutting delinquent loan portfolio The use of sub-servicing arrangements and outright sales of mortgage servicing rights have helped Bank of America (BAC +1%) cut its loan servicing portfolio by nearly 50% since 2010, according to Moody's.The moves mean a significantly smaller delinquent loan portfolio as BofA specifically targeted millions of its loans as high-risk, and chose those for sale or sub-servicing. They also mean major expense cuts thanks to less staff, fewer vendors, and fewer offices. Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 3, 2013 Share Posted October 3, 2013 It seems to me the story is getting better and better every day. There are less media scrunity. These days it seems like JPM is the new punching bag. BAC is staying out of the headlines and it seems like BAC is really getting back to the basic (expense control/cost cutting)... Link to comment Share on other sites More sharing options...
mankap Posted October 3, 2013 Share Posted October 3, 2013 I could not agree more. JPM is the new BAC . BAC was the first one to settle for MBS with Govt. JPM has settled it just now. Citi has not settled it yet. Link to comment Share on other sites More sharing options...
LC Posted October 3, 2013 Share Posted October 3, 2013 in that case, is JPM a screaming buy? Link to comment Share on other sites More sharing options...
wescobrk Posted October 3, 2013 Share Posted October 3, 2013 There was an article in today's wsj that analysts cut their estimate by 27% for bac. The article was very annoying because it repeated that number several times but it never listed the actual number. I read the print edition so I can't post it here. I'm confident the 2 dollar earnings power is there and well see the signs of it next year so one particular quarter isn't a big deal, and I may be wrong, but I would be surprised if we don't see at least 32-36 cents a share for q3. Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 3, 2013 Share Posted October 3, 2013 There was an article in today's wsj that analysts cut their estimate by 27% for bac. The article was very annoying because it repeated that number several times but it never listed the actual number. I read the print edition so I can't post it here. I'm confident the 2 dollar earnings power is there and well see the signs of it next year so one particular quarter isn't a big deal, and I may be wrong, but I would be surprised if we don't see at least 32-36 cents a share for q3. Analysts reduced revenue estimates for the six largest U.S. banks during the quarter and cut profit estimates for all but Wells Fargo. Bank of America, which relies heavily on the trading and mortgage businesses, suffered the biggest drop. Analysts have reduced their third-quarter per-share earnings predictions for the Charlotte, N.C., lender by 27% since July 1. The tempered expectations are a troubling sign for an industry already struggling to overcome lackluster loan demand, a weak economy and the hangover from the 2008 financial crisis, as regulators and government investigators work through a backlog of cases focused on banks' activities during the housing downturn. "For a while we thought a light was at the end of the tunnel," said Gerard Cassidy, a banking analyst with RBC Capital Markets. "It seems to be a Mack truck." Weak Trading, Mortgage Slump, Legal Costs to Cut Results at Banks http://online.wsj.com/article/SB10001424052702303643304579109770709313980.html?mod=WSJ_hp_LEFTWhatsNewsCollection Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 3, 2013 Share Posted October 3, 2013 An article from a few days ago: http://www.thestreet.com/story/12052793/1/bank-of-america-cost-cuts-have-analyst-drooling.html?puc=yahoo&cm_ven=YAHOO The article claims consensus is for 20 cents earning in Q3. Last quarter, the consensus was 25 cents, the "whisper" was 27 cents, and they reported 32 cents. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 3, 2013 Share Posted October 3, 2013 I saw this article last week discussing the hit to trading revenue among the big banks: http://www.fool.com/investing/general/2013/09/27/these-3-mega-banks-stand-to-lose-the-most.aspx A few quotes: Jefferies Group, an investment bank owned by Leucadia National (NYSE: LUK ) , reported that its profit plummeted from roughly $70 million in the third quarter of last year to $12 million this year. This was driven by its fixed-income trading unit watching its revenue fall 88% year over year to $33 million. Ouch. Its trading revenue stood at its lowest level since the depths of the financial crisis, the fourth quarter of 2008. ... In 2012, Citigroup had approximately 22% of its $75 billion in revenue come from trading activities. While this is certainly the most of the four largest banks in the U.S., roughly 90% of its trading revenue (or 20% of its overall revenue) came from its fixed-income business. This trend held true through the first six months of 2013, as it again had its fixed-income revenue make up 20% of its overall revenue. ... Like Citigroup, JPMorgan is heavily dependent on its trading business to drive revenue.However, it is has a slightly better balance between its equity and fixed income divisions. In 2012, about 16% of its total revenue came from its fixed income team, but that number did creep upwards to 17.5% through the first six months of year. ... Next on the list is Bank of America -- which has also watched its trading revenue as a percent of total revenue creep upward through the first six months of 2013 compared to last year (16.5% versus 14%). Yet of the three, it has seemingly the best balance between fixed-income and equity trading, as its fixed-income line item also encompasses currency and commodities trading, which represented 75% of total trading revenue. ... Unsurprisingly, Wells Fargo in facing the least amount of risk, as any potential drop in trading would have an almost unnoticeable impact to its bottom line. In fact, in its most recent 43-page earnings release, it never even mentions "fixed income." While the bank faces potentially sharply lower mortgage-related revenue, shareholders of Wells Fargo can sleep easy tonight as they consider any risk of the fall in bond trading. Link to comment Share on other sites More sharing options...
racemize Posted October 4, 2013 Share Posted October 4, 2013 Anyone still buying these warrants at today's prices? They have moved a lot this past year and I'm debating whether to buy more. Any thoughts? I think generally, the concern with the warrants is the headwind of the dropping cost of leverage. If you haven't read the BAC leverage thread, I would recommend it. That being said, they are probably still better than the common, but you have to assume the common will go up quite a lot, AND, at the same time, realize that it is quite probable that the leverage you are getting won't kick in until later in the life of the warrant, assuming the general consensus (read, mostly Eric) is right, from that leverage thread. 2015 12's seem interesting. or common. or waiting until the 2016s come out (relatively soon). Disclosure: I have 6:2:1 common:warrants:leaps, money-wise. Still haven't made the leap out of the warrants so to speak (hah!). Link to comment Share on other sites More sharing options...
rkbabang Posted October 4, 2013 Share Posted October 4, 2013 Anyone still buying these warrants at today's prices? They have moved a lot this past year and I'm debating whether to buy more. Any thoughts? I think generally, the concern with the warrants is the headwind of the dropping cost of leverage. If you haven't read the BAC leverage thread, I would recommend it. That being said, they are probably still better than the common, but you have to assume the common will go up quite a lot, AND, at the same time, realize that it is quite probable that the leverage you are getting won't kick in until later in the life of the warrant, assuming the general consensus (read, mostly Eric) is right, from that leverage thread. 2015 12's seem interesting. or common. or waiting until the 2016s come out (relatively soon). Disclosure: I have 6:2:1 common:warrants:leaps, money-wise. Still haven't made the leap out of the warrants so to speak (hah!). I've been slowly moving out of the warrants and into the leaps over the past 5 or 6 months. I usually do this on a large down day, because the leaps will fall a much greater percentage than the warrants on these days. Right now at current values I have approximately a 132/54/1 ratio of leaps/warrants/common (I have almost no common, just a few hundred shares to keep track of the price). My leaps are all 2015's in approximately 10/5/2 ratio of $12/$10/$15 strikes. Link to comment Share on other sites More sharing options...
racemize Posted October 4, 2013 Share Posted October 4, 2013 Right now at current values I have approximately a 132/54/1 ratio of leaps/warrants/common (I have almost no common, just a few hundred shares to keep track of the price). I guess that is in # and not in $? I think in # I'm at 2:1.5:1 (all 2015 10s). Link to comment Share on other sites More sharing options...
rkbabang Posted October 4, 2013 Share Posted October 4, 2013 Right now at current values I have approximately a 132/54/1 ratio of leaps/warrants/common (I have almost no common, just a few hundred shares to keep track of the price). I guess that is in # and not in $? I think in # I'm at 2:1.5:1 (all 2015 10s). No that is in $. Take the $ amount of leaps and divide by the $ amount of the common and you get about 132. Take the dollar amount of warrants and divide by the dollar amount of common and you get about 54. Like I said, I don't own much of the common. Link to comment Share on other sites More sharing options...
Mephistopheles Posted October 4, 2013 Share Posted October 4, 2013 Is this in notional $ or actual $ invested? Link to comment Share on other sites More sharing options...
racemize Posted October 4, 2013 Share Posted October 4, 2013 Right now at current values I have approximately a 132/54/1 ratio of leaps/warrants/common (I have almost no common, just a few hundred shares to keep track of the price). I guess that is in # and not in $? I think in # I'm at 2:1.5:1 (all 2015 10s). No that is in $. Take the $ amount of leaps and divide by the $ amount of the common and you get about 132. Take the dollar amount of warrants and divide by the dollar amount of common and you get about 54. Like I said, I don't own much of the common. wow, no kidding, that's quite some leverage there. Link to comment Share on other sites More sharing options...
racemize Posted October 4, 2013 Share Posted October 4, 2013 Is this in notional $ or actual $ invested? mine was in actual $--I think it is the same for RK. I was using the # version to compare notional (after all notional should just be # * share price, unless I'm confused). Link to comment Share on other sites More sharing options...
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