fareastwarriors Posted July 30, 2014 Share Posted July 30, 2014 Bank of America’s Countrywide Ordered to Pay $1.3 Billion http://www.bloomberg.com/news/2014-07-30/bank-of-america-s-countrywide-ordered-to-pay-1-3-billion.html Link to comment Share on other sites More sharing options...
mankap Posted July 30, 2014 Share Posted July 30, 2014 It is almost half of the previous liability. So BAC will probably save $1B. Link to comment Share on other sites More sharing options...
xazp Posted July 30, 2014 Share Posted July 30, 2014 http://www.bloomberg.com/news/2014-07-30/bofa-said-to-near-mortgage-deal-after-raising-offer.html?cmpid=yhoo BAC reportedly near mortgage deal. BAC blinks again (sigh). Link to comment Share on other sites More sharing options...
mankap Posted July 30, 2014 Share Posted July 30, 2014 It does not say what is the agreed amount. I think 13B or 15B does not make a big difference. what matters is that matter is resolved and BAC moves on Link to comment Share on other sites More sharing options...
xazp Posted July 30, 2014 Share Posted July 30, 2014 It really depends on the price and how much extra they write down. I have the suspicion BAC will pay too much, just like C did. I'm against BAC paying extra just to get the monkey off their back, but, I'm not a voting member of the board and I suspect they will surrender again. It does not say what is the agreed amount. I think 13B or 15B does not make a big difference. what matters is that matter is resolved and BAC moves on Link to comment Share on other sites More sharing options...
Yours Truly Posted July 30, 2014 Share Posted July 30, 2014 It really depends on the price and how much extra they write down. I have the suspicion BAC will pay too much, just like C did. I'm against BAC paying extra just to get the monkey off their back, but, I'm not a voting member of the board and I suspect they will surrender again. It does not say what is the agreed amount. I think 13B or 15B does not make a big difference. what matters is that matter is resolved and BAC moves on What ever happened to the CEO fighting in "hand-to-hand combat" to settle these lawsuits.. times have changed and his patience must be running out Link to comment Share on other sites More sharing options...
Guest wellmont Posted July 30, 2014 Share Posted July 30, 2014 these things are always better to move on from....having this go on and on would be an overhang on the stock. it's extortion that must be paid. the stock is being bought on the news of a potential settlement. Link to comment Share on other sites More sharing options...
gokou3 Posted July 30, 2014 Share Posted July 30, 2014 Bank of America’s Countrywide Ordered to Pay $1.3 Billion http://www.bloomberg.com/news/2014-07-30/bank-of-america-s-countrywide-ordered-to-pay-1-3-billion.html Is it a coincidence that we again hear news of pending DOJ settlement on the same day this $1.3B payment is announced? I think not. BAC may be dragging on the DOJ settlement until all these other small cases have been settled. This makes the DOJ settlement the truly *last* lawsuit (fingers crossed!) and less chance for the govt to pursue further $ through other cases. Link to comment Share on other sites More sharing options...
Mephistopheles Posted July 30, 2014 Share Posted July 30, 2014 these things are always better to move on from....having this go on and on would be an overhang on the stock. it's extortion that must be paid. the stock is being bought on the news of a potential settlement. But in terms of long term IV, the short term movement doesn't matter. It's extortion and they should fight it out. The risk is on the PR front, but the American people have a low attention span and a short memory. They'd get bored of "DOJ sues BAC" soon enough. Link to comment Share on other sites More sharing options...
morningstar Posted July 30, 2014 Share Posted July 30, 2014 these things are always better to move on from....having this go on and on would be an overhang on the stock. it's extortion that must be paid. the stock is being bought on the news of a potential settlement. But in terms of long term IV, the short term movement doesn't matter. It's extortion and they should fight it out. The risk is on the PR front, but the American people have a low attention span and a short memory. They'd get bored of "DOJ sues BAC" soon enough. I don't think this company is in position to say that the settlement amounts being discussed represent an NPV negative outcome. (1) The potential liabilities if you take this to court and get an unfavorable judgement are gargantuan. (2) The discount rate that should be applied is pretty low, because the risk around this litigation forces BAC to hold meaningful excess capital which otherwise could be returned through better capital return allowances under CCAR. BAC earns very little on marginal equity in today's environment due to the lack of loan growth. So the usual dynamic in which the payer benefits from the time taken by litigation doesn't really exist in this situation - there's no point to delaying whatever payment will be due. And since the government doesn't actually need this money, the payee's usual eagerness to accelerate the payment also doesn't apply. Ultimately BAC is just doing what any bank would and should do when facing a risk that is very hard to put numbers on and of potentially huge size. You see this all the time, e.g. Dimon closing the whale trade at a huge loss. Link to comment Share on other sites More sharing options...
meiroy Posted July 31, 2014 Share Posted July 31, 2014 (1) The potential liabilities if you take this to court and get an unfavorable judgement are gargantuan. Considering BACs size -- and indirectly other banks' -- what would be the impact on the economy of such litigation? Link to comment Share on other sites More sharing options...
morningstar Posted July 31, 2014 Share Posted July 31, 2014 (1) The potential liabilities if you take this to court and get an unfavorable judgement are gargantuan. Considering BACs size -- and indirectly other banks' -- what would be the impact on the economy of such litigation? I think the impact has already been significant - the amount this has weighed on a housing recovery has probably been a detectable contribution to GDP. The impact to other banks has been mitigated by the fact that most of them have settled already. In this environment I don't think there is a lot of systemic concern about targeting banks generally because there is, despite everything, tons of equity available for these companies and they are already in pretty strong condition. So the worst that happens is you punish existing investors and new equity investors replace them. Link to comment Share on other sites More sharing options...
Mephistopheles Posted July 31, 2014 Share Posted July 31, 2014 http://dealbook.nytimes.com/2014/07/30/bank-of-america-ordered-to-pay-nearly-1-3-billion-in-mortgage-case/?_php=true&_type=blogs&_r=0 Bank of America Raises Its Mortgage Settlement Offer Link to comment Share on other sites More sharing options...
fareastwarriors Posted August 1, 2014 Share Posted August 1, 2014 Anyone adding here sub-15? Link to comment Share on other sites More sharing options...
xazp Posted August 1, 2014 Share Posted August 1, 2014 I'm not quite sure why the banks are hurting worse than the market today(?). Thought employment looked fine and rate raises (which helps financials at not many others) seem to be on the way in the next half-year to year. Anyone adding here sub-15? Link to comment Share on other sites More sharing options...
ERICOPOLY Posted August 1, 2014 Share Posted August 1, 2014 BAC is offering $7b cash for a total settlement of $14b. The government wants more cash (at least $10b and a total settlement of $17b). So they are perhaps $3b in cash apart. The bank is earning $6b+ pre-tax quarterly at the moment. Therefore, the difference is only 6 weeks. We are already 4 weeks into the present quarter. I think a deal will come instead of going to trial. Link to comment Share on other sites More sharing options...
Liberty Posted August 1, 2014 Share Posted August 1, 2014 Now would certainly be a good time for the company to do a sizeable buyback... Oh, wait :P Link to comment Share on other sites More sharing options...
ourkid8 Posted August 1, 2014 Share Posted August 1, 2014 I would love to see $1-2B in stock being repurchased at the current price. August 10th is the announcement date so we are almost there. I am really on the fence do I add to my position or not... Tks, S Now would certainly be a good time for the company to do a sizeable buyback... Oh, wait :P Link to comment Share on other sites More sharing options...
LC Posted August 1, 2014 Share Posted August 1, 2014 Just back of the envelope, if FV is around 20/sh and they will achieve that in 2 years, you're looking at about a 16.66% return per year if you buy @ 15/sh. Link to comment Share on other sites More sharing options...
xazp Posted August 1, 2014 Share Posted August 1, 2014 Plus 1-2%/year in dividends. It's not a slam dunk return, but, probably better than the market/bonds/cash. Key unknowns: -- earnings uplift from interest rates? -- can they close the margin gap with better-run banks? -- how much capital can they return? The last one is a real wild card to me. In theory (meaning my theory, since no one else talks about it much), BAC should be able to return all the capital they generate. That's because - I think - BAC is focused on "better" loans and not "more" loans. So BAC should be able to return all the capital they generate. If you believe $2/share in earnings, that implies > $2/share in capital - but what would BAC trade at if they could reliably return $2/share each year? Surely not $20? Just back of the envelope, if FV is around 20/sh and they will achieve that in 2 years, you're looking at about a 16.66% return per year if you buy @ 15/sh. Link to comment Share on other sites More sharing options...
MYDemaray Posted August 1, 2014 Share Posted August 1, 2014 xazp -- have you spent any time thinking about this demand deposit drain that JPM and ZION is talking about when the Fed reverses? I think the theory is that some of the over-capitalization may normalize. Wondering how this affects capital return, if at all.... Link to comment Share on other sites More sharing options...
xazp Posted August 1, 2014 Share Posted August 1, 2014 Deposits and capital are two different things... deposits are like a liability, capital is like retained earnings. Deposits can be repaid with the hundreds of billions of dollars of liquidity that BAC has, and capital would not change. I think JPM (etc) are just guiding you to understand that deposits may fall. These big guys have at least a hundred billion dollars in deposits they don't have a clue what to do with (i.e. london whale, give it to the central bank, etc) If some of that disappears, it wouldn't impact BAC's earnings. More or less they're just stashing excess deposits with another bank (i.e. the Fed) and not really gaining or losing money on those deposits. It would impact banks that run at close to a loan/deposit of 1 (then when deposits falls, they may have to stop lending). I can only dream about BAC having this problem one day. xazp -- have you spent any time thinking about this demand deposit drain that JPM and ZION is talking about when the Fed reverses? I think the theory is that some of the over-capitalization may normalize. Wondering how this affects capital return, if at all.... Link to comment Share on other sites More sharing options...
CorpRaider Posted August 1, 2014 Share Posted August 1, 2014 I've been nibbling at this the last couple of days. So I can now commiserate with you all. Seems like they are getting close to settling. What's a few billion between friends. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted August 2, 2014 Share Posted August 2, 2014 BAC traded for a 4% premium to tangible book yesterday. Book value per share is up to $21.16, for whatever that's worth. The stock market is annoying. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted August 2, 2014 Share Posted August 2, 2014 It's been almost three years now since the days in 2011 when many of us bought. Remember August 2011 when AIG filed suit? It seemed like lawsuits were being filed weekly. Now, we're through most of them. Link to comment Share on other sites More sharing options...
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