BAC-WT - Bank of America Warrants

[Grenville]

Allan Mecham on BAC:

 

http://www.beyondproxy.com/bank-america-bac-2/

 

Thanks for posting. Allan Mecham runs Arlington Value. They just posted an excerpt from his letter.

[xazp]

http://www.thestreet.com/story/12724792/1/bank-of-america-shares-erase-some-gains-as-ceo-mum-on-dividend.html?puc=yahoo&cm_ven=YAHOO

 

I guess the street is upset that Moynihan didn't say anything about the dividend.  Pretty weird given that AFAIK zero companies talk about their capital return requests before they are approved.

 

I'm still holding out hope, however faint, that they leave the div at $0 and max out the buyback.  Just buy $5Bn of stock at $15/share, please. 

 

 

[Uccmal]

 

 

1 Big legal settlement left:

 

http://www.charlotteobserver.com/2014/05/28/4938626/bank-of-america-ceo-brian-moynihan.html#.U4cvRn-9KK0

 

He wouldn't make this statement if he thought he could get sued for missing something.

[ourkid8]

+1

 

 

 

1 Big legal settlement left:

 

http://www.charlotteobserver.com/2014/05/28/4938626/bank-of-america-ceo-brian-moynihan.html#.U4cvRn-9KK0

 

He wouldn't make this statement if he thought he could get sued for missing something.

[Grenville]

 

 

1 Big legal settlement left:

 

http://www.charlotteobserver.com/2014/05/28/4938626/bank-of-america-ceo-brian-moynihan.html#.U4cvRn-9KK0

 

He wouldn't make this statement if he thought he could get sued for missing something.

 

Thanks for posting. Will have to listen to the Sanford conference.

[gary17]

Hopefully there will be capital left after this one BIG legal settlement...  8)

[gokou3]

 

 

1 Big legal settlement left:

 

http://www.charlotteobserver.com/2014/05/28/4938626/bank-of-america-ceo-brian-moynihan.html#.U4cvRn-9KK0

 

He wouldn't make this statement if he thought he could get sued for missing something.

 

Thanks for posting. Will have to listen to the Sanford conference.

 

Transcript here:

 

http://finance.yahoo.com/news/bank-america-corps-bac-ceo-051803046.html

 

 

John McDonald – Sanford C. Bernstein & Co., LLC

 

Now, legal costs have obviously been a distraction to that core expense improvement story. We've got a lot of generalists in the audience. Is there a way to kind of summarize what's left on the legal front and maybe what inning you hope we're in?

 

Brian Moynihan

 

Well, I think the key is to focus on what's left. If you think about the last several quarters – last several years frankly, we've been able to – it's 35 months since we announced the settlement of Gibbs & Bruns and we're still finishing up to the court system to get that one done. And that's one of our big settlements for those who aren't familiar. But I'd say that in the mortgage area, we got – if you think about disclosure and what we've got out there, we saw the Justice Department situation which we'll continue to work on. But the rest of the stuff is pretty well done, it's just worked its way through the system.

 

So it's working its way through, you got one left to deal with that, the rest of them are done. You got the GSEs effort done. So, you've got these investigations and it is part of Justice. That's the piece that's left of any one on – and we got a myriad of cases that we'll work through, but the big stuff that's really the one that's left out there. And so, that has an unpredictability to it that we just got to get through, and so we put some money up in the last quarter. We got FOF in them, which is a big one, because that was really a hard case, was working its way through the court system, is going to cost lot of time and money. That's done. This one is a little hard, because you got to kind of work through a big group of people.

 

John McDonald – Sanford C. Bernstein & Co., LLC

 

And then beyond the mortgage space, you've got some industry investigations going on, I guess, globally in terms of LIBOR and FX, it's just too early on that front?

 

Brian Moynihan

 

There's not lot to report there. And then there's other mortgage cases that are smaller, and stuff. But I think we – there's not a lot to report. There are public disclosure, sort of speaks for itself. But I think that most people think of litigation in tens of billions of dollars, it's been around the mortgage and I think the rep and warranty claims and all that stuff is getting there. And so, actually operating outside of the two we just mentioned FOF, and just the operating expenses really the big issue right now for that.

 

I myself am skeptical that we are one away from done.  It seems like the government is getting better at finding ways to "tax" the banks.

[xazp]

Well you could easily parse his statement as meaning "that's all the legal left on the mortgage front." 

 

There are other fronts!  LIBOR, FOREX, I'm sure there are others. 

 

 

 

 

 

1 Big legal settlement left:

 

http://www.charlotteobserver.com/2014/05/28/4938626/bank-of-america-ceo-brian-moynihan.html#.U4cvRn-9KK0

 

He wouldn't make this statement if he thought he could get sued for missing something.

 

Thanks for posting. Will have to listen to the Sanford conference.

 

Transcript here:

 

http://finance.yahoo.com/news/bank-america-corps-bac-ceo-051803046.html

 

 

John McDonald – Sanford C. Bernstein & Co., LLC

 

Now, legal costs have obviously been a distraction to that core expense improvement story. We've got a lot of generalists in the audience. Is there a way to kind of summarize what's left on the legal front and maybe what inning you hope we're in?

 

Brian Moynihan

 

Well, I think the key is to focus on what's left. If you think about the last several quarters – last several years frankly, we've been able to – it's 35 months since we announced the settlement of Gibbs & Bruns and we're still finishing up to the court system to get that one done. And that's one of our big settlements for those who aren't familiar. But I'd say that in the mortgage area, we got – if you think about disclosure and what we've got out there, we saw the Justice Department situation which we'll continue to work on. But the rest of the stuff is pretty well done, it's just worked its way through the system.

 

So it's working its way through, you got one left to deal with that, the rest of them are done. You got the GSEs effort done. So, you've got these investigations and it is part of Justice. That's the piece that's left of any one on – and we got a myriad of cases that we'll work through, but the big stuff that's really the one that's left out there. And so, that has an unpredictability to it that we just got to get through, and so we put some money up in the last quarter. We got FOF in them, which is a big one, because that was really a hard case, was working its way through the court system, is going to cost lot of time and money. That's done. This one is a little hard, because you got to kind of work through a big group of people.

 

John McDonald – Sanford C. Bernstein & Co., LLC

 

And then beyond the mortgage space, you've got some industry investigations going on, I guess, globally in terms of LIBOR and FX, it's just too early on that front?

 

Brian Moynihan

 

There's not lot to report there. And then there's other mortgage cases that are smaller, and stuff. But I think we – there's not a lot to report. There are public disclosure, sort of speaks for itself. But I think that most people think of litigation in tens of billions of dollars, it's been around the mortgage and I think the rep and warranty claims and all that stuff is getting there. And so, actually operating outside of the two we just mentioned FOF, and just the operating expenses really the big issue right now for that.

 

I myself am skeptical that we are one away from done.  It seems like the government is getting better at finding ways to "tax" the banks.

[sswan11]

from Barron's:

 

http://online.barrons.com/news/articles/SB50001424053111904125704579588090504994178?mod=googlenews_barrons

 

Bank Stocks on Sale

Bank shares trade at just 12.1 times 2014 earnings, making their shares some of the cheapest in the Standard & Poor's 500 index.

 

By BEN LEVISOHN

May 31, 2014 1:59 a.m. ET

Like a would-be summer blockbuster that follows the mega-hit formula but tanks at the box office, bank stocks have been left behind despite possessing characteristics investors seem to crave.

 

Investors have been clear about what draws them to a stock this year: They want them big and they want them cheap. That has helped the shares of giant companies like Apple (ticker: AAPL) and Johnson & Johnson (JNJ) jump out to big gains in 2014, even as smaller, more expensive ones like Best Buy (BBY) and Yahoo! (YHOO) have been vilified.

 

On those characteristics alone, then, banks should have been primed for success. The sector trades at just 12.1 times 2014 earnings, making their shares some of the cheapest in the Standard & Poor's 500 index. And who could ask for bigger than too big to fail? Instead, financials have been among the disappointments this year. The sector has outgained just consumer-discretionary and telecommunications stocks, while JPMorgan Chase (JPM) has shed 4.9% and Citigroup ©, nearly twice that. The S&P 500, by comparison, has gained 4%. Better times, however, could be ahead for these fallen stars.

 

These aren't just any cheap stocks—they're banks—and they're not just big but so big they could potentially derail the economy. The big banks have been hit by massive litigation expenses that just keep coming—$7 billion in the first quarter alone; by new rules and regulations that force them to carry more cash at the expense of profitability and returns; and by lackluster trading, which forced Citigroup, for one, to forecast a drop in trading revenue of as much as 25% last week. If anything, the sector should come with its own parental warning.

 

The issues have been compounded by the sudden and unexpected drop in bond yields this year. In the past, lower long-term yields would have been considered good news for the financial sector, notes International Strategy & Investment Group analyst Glenn Schorr. That's because bond prices rise as yields fall, and under normal conditions that would lead to more trading activity and demand for loans. But these aren't normal conditions, thanks to the Federal Reserve's low-interest-rate policy. So even as the 10-year Treasury yield has slid to 2.46% from 3.03% at the beginning of the year, the strength of bank stocks relative to the S&P 500 has slid like the box-office take of an Adam Sandler flick.

 

There are reasons for hope. Bank stocks are still cheap this year, even as the S&P 500 has hit a record high—that 12.1 times is well below the S&P 500's 16.1 times. That low valuation also provides a margin of safety if bond yields start to rise that other, pricier sectors lack, notes Deutsche Bank strategist David Bianco. The banks are the place to be "for anyone looking for a part of the equity market that is not dependent on interest rates staying low for a long time," Bianco says.

 

There are more-fundamental reasons why banks could regain their luster. Start with the U.S. economy. Last week, we learned that gross domestic product dropped 1% during the first three months of 2014, but no one expects it to remain that weak. Signs of a stronger economy are everywhere—from another decline in jobless claims to a service sector growing at its fastest pace since March 2012. And for the first time since the financial crisis, loans are growing at the same pace as the economy, Bianco says—and that bodes well for both revenue and earnings growth in the quarters ahead.

 

And just as moviegoers love big explosions and wild chases, investors still want to see capital returned — especially when there's not much else to do with it. Banks have been trying to deliver on that count: Their dividends are set to grow by some 30% in 2014. But they've been limited by regulators, who continue to insist they need larger capital cushions. Still, all of that capital will continue to build up on bank balance sheets, and at some point, some of it will have to be returned to investors, explains MKM Partners analyst David Trone. He notes that JPMorgan could pile up $35.8 billion in excess capital but will only be allowed to return $6.8 billion in buybacks and dividend increases through the first quarter of 2015. Citigroup, meanwhile, could build up $52.2 billion, but wasn't allowed to return any capital to shareholders. At some point, the flood gates will have to open.

 

The question is when. Nomura analyst Bill Carcache says a least one bank doesn't need full credit for capital trapped on its balance sheet to have plenty of upside — Wells Fargo (WFC). The San Francisco-based giant has less excess capital on its balance sheet than most of its competitors, and has a payout ratio of 70%. Carcache already expects Wells to gain 19% during the next 12 months. That would jump to 25% if it's allowed to return more cash to investors.

 

Either way, it looks like a winner.

[colinwalt]

Leaps or common?

 

Has anyone else been buying BAC at these levels.  The stock was last at this level  nearly 7 months ago, and prior to that bounced around 13.60 for a half year.  Arguably BAC is safer now at 15 than it was at 13.60 or 14.75 when there were still more unannounced big settlements such as the 9.0 b AIG suit.  More crappy mortgages have run off the books. 

 

The only major suit remaining seems to be the DOJ (dont quote me on this as we dont know for sure).

 

I've been buying.  Pretty nice opportunity at these levels. 

 

Now watch it drop another 15%.

 

Anyone else.  We are less than 10% above TBV and 25% below book.  I have increased my position by nearly 40%.

 

Only Leaps 2016's - $15. strike.  I honestly didn't think we would be here again - in a major buy zone. 

 

I am finding it hard to resist.  I have hedged 50% with $12.00 strike 2015 puts, in case of a catastrophic drop.

 

Hi Uccmal,

 

Just wondering how you model the hedged part of this, for example, if you buy 100 2016 $15 Leaps what assumptions do you use to figure out how many 2015 $12 puts you need to be hedged 50%.

 

And by hedged I guess you mean 50% of the amount you invested in the Calls? And what kind of price target would BAC have to fall to for the 50% hedge to work - or it kind of works for any price level under the 15 strike price as the more you lose on the Calls, the more you gain on the Puts?

 

Thanks Colin.

[fareastwarriors]

Bank of America Says Mistake Inflated Reported Size of Dark Pool

 

http://www.bloomberg.com/news/2014-06-02/bank-of-america-says-mistake-inflated-reported-size-of-dark-pool.html

 

oops

[Johnson]

Bank of America Says Mistake Inflated Reported Size of Dark Pool

 

http://www.bloomberg.com/news/2014-06-02/bank-of-america-says-mistake-inflated-reported-size-of-dark-pool.html

 

oops

 

This is a good thing, right?

[Uccmal]

Leaps or common?

 

Has anyone else been buying BAC at these levels.  The stock was last at this level  nearly 7 months ago, and prior to that bounced around 13.60 for a half year.  Arguably BAC is safer now at 15 than it was at 13.60 or 14.75 when there were still more unannounced big settlements such as the 9.0 b AIG suit.  More crappy mortgages have run off the books. 

 

The only major suit remaining seems to be the DOJ (dont quote me on this as we dont know for sure).

 

I've been buying.  Pretty nice opportunity at these levels. 

 

Now watch it drop another 15%.

 

Anyone else.  We are less than 10% above TBV and 25% below book.  I have increased my position by nearly 40%.

 

Only Leaps 2016's - $15. strike.  I honestly didn't think we would be here again - in a major buy zone. 

 

I am finding it hard to resist.  I have hedged 50% with $12.00 strike 2015 puts, in case of a catastrophic drop.

 

Hi Uccmal,

 

Just wondering how you model the hedged part of this, for example, if you buy 100 2016 $15 Leaps what assumptions do you use to figure out how many 2015 $12 puts you need to be hedged 50%.

 

And by hedged I guess you mean 50% of the amount you invested in the Calls? And what kind of price target would BAC have to fall to for the 50% hedge to work - or it kind of works for any price level under the 15 strike price as the more you lose on the Calls, the more you gain on the Puts?

 

Thanks Colin.

 

I am working it out on a 1 to 1 basis.  So 70% coverage at this point means 70 puts for 100 Leaps.  30 are left uncovered.  The decay rates of the 2015 puts is faster than the 2016 leaps at this point in time.  The reason I have done this is strictly for catastrophe protection.  If for some reason BAC dropped in the next few months to $12 or below the puts would rise significantly in value, offsetting the losses on the leaps - I could sell them, sell the leaps or both depending on circumstances.  Beyond about October it would really have to get pummelled to make these worthwhile.  It is far from perfect but would prevent a total loss. 

 

I am using it as short term protection.  There will be two earnings releases and likely the DOJ settlement before the puts expire.  If there is an overall market crash (correction) it is very possible that BAC will oversell. 

[colinwalt]

 

Only Leaps 2016's - $15. strike.  I honestly didn't think we would be here again - in a major buy zone. 

 

I am finding it hard to resist.  I have hedged 50% with $12.00 strike 2015 puts, in case of a catastrophic drop.

 

Hi Uccmal,

 

Just wondering how you model the hedged part of this, for example, if you buy 100 2016 $15 Leaps what assumptions do you use to figure out how many 2015 $12 puts you need to be hedged 50%.

 

And by hedged I guess you mean 50% of the amount you invested in the Calls? And what kind of price target would BAC have to fall to for the 50% hedge to work - or it kind of works for any price level under the 15 strike price as the more you lose on the Calls, the more you gain on the Puts?

 

Thanks Colin.

 

I am working it out on a 1 to 1 basis.  So 70% coverage at this point means 70 puts for 100 Leaps.  30 are left uncovered.  The decay rates of the 2015 puts is faster than the 2016 leaps at this point in time.  The reason I have done this is strictly for catastrophe protection.  If for some reason BAC dropped in the next few months to $12 or below the puts would rise significantly in value, offsetting the losses on the leaps - I could sell them, sell the leaps or both depending on circumstances.  Beyond about October it would really have to get pummelled to make these worthwhile.  It is far from perfect but would prevent a total loss. 

 

I am using it as short term protection.  There will be two earnings releases and likely the DOJ settlement before the puts expire.  If there is an overall market crash (correction) it is very possible that BAC will oversell.

 

Thanks for clarifying.... much appreciated.

[fareastwarriors]

BofA in Talks to Pay At Least $12 Billion to Settle Probes

 

At Least $5 Billion Expected to Go to Consumer Relief

 

 

http://online.wsj.com/articles/bofa-in-talks-to-pay-at-least-12-billion-to-settle-probes-1402006948?mod=WSJ_hp_LEFTWhatsNewsCollection

 

 

Bank of America Corp. BAC +1.45% is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, according to people familiar with the negotiations.

 

At least $5 billion of that amount is expected to go toward consumer relief—consisting of help for homeowners in reducing principal amounts, reducing monthly payments and paying for blight removal in struggling neighborhoods, these people said.

[rohitc99]

BofA in Talks to Pay At Least $12 Billion to Settle Probes

 

At Least $5 Billion Expected to Go to Consumer Relief

 

 

http://online.wsj.com/articles/bofa-in-talks-to-pay-at-least-12-billion-to-settle-probes-1402006948?mod=WSJ_hp_LEFTWhatsNewsCollection

 

Bank of America Corp. BAC +1.45% is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, according to people familiar with the negotiations.

 

At least $5 billion of that amount is expected to go toward consumer relief—consisting of help for homeowners in reducing principal amounts, reducing monthly payments and paying for blight removal in struggling neighborhoods, these people said.

 

groundhog day !!

[mankap]

Does this include the amount already paid to FHFA?

[sswan11]

[pre]Does this include the amount already paid to FHFA?[/pre]

 

Paying at least $5 billion to help homeowners is part of a broader scenario Bank of America has floated, in which it would pay a total $12 billion in addition to the previous $6 billion FHFA settlement, these people said. That $12 billion would include both "hard money," or fines, and "soft money," or consumer relief. The bank has floated the idea of paying more than half of its settlement via soft money.

 

http://online.wsj.com/articles/bofa-in-talks-to-pay-at-least-12-billion-to-settle-probes-1402006948?tesla=y&mg=reno64-wsj&url=http://online.wsj.com/article/SB10001424052702304710104579606704277606742.html

[ERICOPOLY]

$12 billion. 

 

$2.5 billion already reserved.  So there is a cost of $9.5 billion left.  It will eat up roughly April, May, June, July, August pre-tax earnings. 

 

So by September, we can start to actually keep some earnings...  I mean, start to establish a reserve for the foreclosure abuses.

[ERICOPOLY]

I'm curious who has it worse.  BofA shareholders or the Fannie/Freddie shareholders.  It seems in both cases the government has nationalized all the earnings.

[ERICOPOLY]

Another question:

 

Why did they reserve such a small amount in Q1 when they knew they would be offering north of $12b in a settlement?  They made the leap from thinking it would only be $2.5b to then offering $12b just two months later?  It sounds like lying to me.

[gary17]

Eric

so if we look on the bright side this is June now - so 3 more months of earnings to go and we are done =)

 

it is what it is... it sucks but we are close to the end.

 

Gary

[Guest Dazel]

 

 

Eric,

 

$12 billion is a headline number to me...However, the number is not 12.5 b cash the majority of it is mortgage relief and other non cash restructuring.

 

Look at it this way....we will not hear about anything material again once it is done....get it over with. The Geico and American express type situation at Bank of America is coming to an end....

 

The brand will be restored. I would pay a great deal for that....I have bet big on this happy ending.

 

Dazel

[jay21]

$12 billion. 

 

$2.5 billion already reserved.  So there is a cost of $9.5 billion left.  It will eat up roughly April, May, June, July, August pre-tax earnings. 

 

So by September, we can start to actually keep some earnings...  I mean, start to establish a reserve for the foreclosure abuses.

 

Eric, as Dazel has said don't be fooled by the headline number. Consumer relief means mortgage mods, and generally these mortgages have been owned by RMBS holders and do not affect the bank as much.

[sswan11]

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.

 

http://seekingalpha.com/news/1788703-boa-slips-on-12b-settlement-amount