ERICOPOLY Posted August 29, 2014 Share Posted August 29, 2014 2014 Q1 earnings: $0.35 after-tax (excluding 40 cent after-tax litigation expense) 2014 Q2 earnings: $0.41 after-tax (excluding 22 cent after-tax litigation expense) So far, we're on track for about $1.60 in 2014 (excluding litigation expense) Where do the analysts get their $1.50 consensus number from for 2015? The bank executives are saying $2 per share in 2016 with 100bps lift in interest rates, or $1.80 per share in 2016 without a change in interest rates. It's a bit strange that the bank is saying $1.80 to $2.00 per share in 2016, they're making roughly $1.60 pace this year so far, and analyst consensus is for $1.50 next year. Just seems a bit odd. You get the $1.80 to $2.00 estimate from management by taking their 14% ROTCE estimate and multiplying by $14.20 (tangible book). They stated the after-tax value of the interest rate lift is only $2b, so that takes you down roughly 20 cents to $1.80. Link to comment Share on other sites More sharing options...
onyx1 Posted August 29, 2014 Share Posted August 29, 2014 DOJ to Give Leftist Groups Cut of B of A Settlement http://www.judicialwatch.org/blog/2014/08/doj-give-leftist-groups-cut-b-settlement/?utm_source=twitterfeed&utm_medium=twitter Well, I hope we at least got a tax deduction for our "donation". Link to comment Share on other sites More sharing options...
CorpRaider Posted August 29, 2014 Share Posted August 29, 2014 What if treasuries follow the bund once the ECB starts priming the pump? I mean they are the biggest economy in the world collectively, right? Link to comment Share on other sites More sharing options...
topofeaturellc Posted August 29, 2014 Share Posted August 29, 2014 then its worth your estimate of tang book post whatever contingent liabilities you expect to crystalize - (the losses incurred for however long you think it takes management to figure out its a 10% ROE biz and that the branch biz is useless) Assuming you think rates are at zero for forever. At some point rates will go up and there will be value in a deposit franchise. I'd even argue that people and businesses place a value on deposit banking so if rates stayed at zero for forever you'd see banks start to add fees to accounts to get paid. The ROA of deposit banks is really pretty consistent even though the way they generate that ROA has changed dramatically post-war. I think they only way you really suffer a meaningful permanent impairment is if we go through another credit cycle and it turns out BAC needs to raise equity again. Otherwise the downside case isn't that bad. Link to comment Share on other sites More sharing options...
topofeaturellc Posted August 29, 2014 Share Posted August 29, 2014 Well BAC does own some world-class businesses. Wealth management is good and investment banking is a nice business in that you earn fee income without taking a lot of credit risk. Both of these are world class and better than WFC. In addition, BAC's ability to attract deposits is also good, as is the breadth of their ATM network. However, in aggregate the company does not earn anything like the returns of WFC. So where is the gap coming from? Oh profoundly mediocre might be too nice. And for the last few years the only US things I've owned were banks. Mostly simpler regionals tho. Esp the TARP warrants. But not this. The simple question is what was ROTCE on the heritage bank assets that now make up BAC. I'd say WFC is irrelevant right? Everything else is probably worth book. earns CoE on its tang book. I've no idea if that adds up to 14% or even close. I don't have the data in front of me but IIRC deposit funded banks are like 17% on average. The fee part of IB is great, but its mostly a capital business for BAC - though granted there is some relationship, so I might disagree there. Link to comment Share on other sites More sharing options...
merkhet Posted August 29, 2014 Share Posted August 29, 2014 Well BAC does own some world-class businesses. Wealth management is good and investment banking is a nice business in that you earn fee income without taking a lot of credit risk. Both of these are world class and better than WFC. In addition, BAC's ability to attract deposits is also good, as is the breadth of their ATM network. However, in aggregate the company does not earn anything like the returns of WFC. So where is the gap coming from? I believe the average WFC customer has significantly more products with WFC than the average customer of BAC. The cross-selling is much higher -- that should cover at least some of the difference. Anecdotally, WFC always asks me if I need additional products pretty much every time I step into the branch. I don't think Bank of America has asked me even once. Link to comment Share on other sites More sharing options...
xazp Posted August 29, 2014 Share Posted August 29, 2014 I believe the average WFC customer has significantly more products with WFC than the average customer of BAC. The cross-selling is much higher -- that should cover at least some of the difference. >> This is definitely true. BAC is definitely trying to copy WFC in this model. Where I think it really holds up is during "bad times" - if you've got your direct-deposit bank account tied to your credit card or mortgage, and you get them to auto-pay then the bank in effect is first in line before all other creditors. WFC is the king of this, and BAC is trying to catch up. So you'll see (for example) you can get free trades in Merrill Edge if you have a BAC account; you get various benefits for having > 1 product with BAC. In the mortgage respect, anyway, BAC is actually more conservative to WFC. WFC is growing their correspondent mortgage business while BAC has shut theirs entirely down. My wife did recently do some business at a BAC branch and they tried to sell her on 3 more products. So at least anecdotally here, they were trying to cross-sell. Well BAC does own some world-class businesses. Wealth management is good and investment banking is a nice business in that you earn fee income without taking a lot of credit risk. Both of these are world class and better than WFC. In addition, BAC's ability to attract deposits is also good, as is the breadth of their ATM network. However, in aggregate the company does not earn anything like the returns of WFC. So where is the gap coming from? I believe the average WFC customer has significantly more products with WFC than the average customer of BAC. The cross-selling is much higher -- that should cover at least some of the difference. Anecdotally, WFC always asks me if I need additional products pretty much every time I step into the branch. I don't think Bank of America has asked me even once. Link to comment Share on other sites More sharing options...
CorpRaider Posted August 29, 2014 Share Posted August 29, 2014 BAC is trying to copy WFC's retail banking model and WFC is trying to copy BAC's asset management business. Who would have ever thought Norwest Financial would be the envy of the banking world? Link to comment Share on other sites More sharing options...
nikhil25 Posted August 29, 2014 Share Posted August 29, 2014 Bank of America seeks to void verdict in $1.27 billion Countrywide 'Hustle' case http://www.reuters.com/article/2014/08/28/us-bank-of-america-fraud-idUSKBN0GS2OL20140828 Link to comment Share on other sites More sharing options...
karthikpm Posted August 29, 2014 Share Posted August 29, 2014 Interesting article in the Economist about criminilization of corporate entities http://www.economist.com/news/leaders/21614138-companies-must-be-punished-when-they-do-wrong-legal-system-has-become-extortion Link to comment Share on other sites More sharing options...
colinwalt Posted August 30, 2014 Share Posted August 30, 2014 If making it to the cover of a magazine is a sign of the peak, the latest economist cover should be a relief to everyone here. Their cover is on the American government's "extortion racket". :-) Here's a link to the main article: http://www.economist.com/news/briefing/21614101-corporate-america-finding-it-ever-harder-stay-right-side-law-mammoth-guilt Link to comment Share on other sites More sharing options...
xazp Posted August 31, 2014 Share Posted August 31, 2014 Richard Penza on BAC and C: http://online.barrons.com/news/articles/SB50001424127887324616904580107543590420672?mod=BOL_hp_popview Citigroup is expected to earn about $4.40 a share this year, and we think normalized earnings in five years could be $8.40. And for Bank of America, normalized earnings could be $2.30 a share, versus about $1.30 projected for this year. They sell for approximately book value and for 10 to 12 times current-year earnings. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted August 31, 2014 Share Posted August 31, 2014 Richard Penza on BAC and C: http://online.barrons.com/news/articles/SB50001424127887324616904580107543590420672?mod=BOL_hp_popview Citigroup is expected to earn about $4.40 a share this year, and we think normalized earnings in five years could be $8.40. And for Bank of America, normalized earnings could be $2.30 a share, versus about $1.30 projected for this year. They sell for approximately book value and for 10 to 12 times current-year earnings. Hope it works out better than his call on Freddie Mac in 2007: http://seekingalpha.com/article/55846-vic-rich-pzena-freddie-macs-the-cheapest-stock-ive-ever-seen 'Freddie Mac's the Cheapest Stock I've Ever Seen' Link to comment Share on other sites More sharing options...
xazp Posted August 31, 2014 Share Posted August 31, 2014 He, along with people like Bruce Berkowitz and Bill Miller, are very good in bull markets and terrible in bear markets. It's up to the reader to decide which we are in :). Richard Penza on BAC and C: http://online.barrons.com/news/articles/SB50001424127887324616904580107543590420672?mod=BOL_hp_popview Citigroup is expected to earn about $4.40 a share this year, and we think normalized earnings in five years could be $8.40. And for Bank of America, normalized earnings could be $2.30 a share, versus about $1.30 projected for this year. They sell for approximately book value and for 10 to 12 times current-year earnings. Hope it works out better than his call on Freddie Mac in 2007: http://seekingalpha.com/article/55846-vic-rich-pzena-freddie-macs-the-cheapest-stock-ive-ever-seen 'Freddie Mac's the Cheapest Stock I've Ever Seen' Link to comment Share on other sites More sharing options...
CorpRaider Posted August 31, 2014 Share Posted August 31, 2014 I wouldn't lump berkowitz with pzena and nygren. He sailed through the crisis like the gd master and commander, he was just a bit early in the financials in 2011. Link to comment Share on other sites More sharing options...
plato1976 Posted August 31, 2014 Share Posted August 31, 2014 agree - totally different I wouldn't lump berkowitz with pzena and nygren. He sailed through the crisis like the gd master and commander, he was just a bit early in the financials in 2011. Link to comment Share on other sites More sharing options...
xazp Posted September 1, 2014 Share Posted September 1, 2014 Really? Peak to trough it looks like he dropped by over 50%. He recovered well, but I would not say he performed well during the bear market. agree - totally different I wouldn't lump berkowitz with pzena and nygren. He sailed through the crisis like the gd master and commander, he was just a bit early in the financials in 2011. Link to comment Share on other sites More sharing options...
Uccmal Posted September 1, 2014 Share Posted September 1, 2014 The only investors I can think of who sailed through the crash were Buffett, FFH, the dudes from the big short, and Seth Klarman. Everyone else I know of on the guru lists had permanent loss of capital. They were forced to make redemptions at the bottom. That is the problem with the mutual fund/limited partner type of arrangement. Link to comment Share on other sites More sharing options...
CorpRaider Posted September 1, 2014 Share Posted September 1, 2014 I dunno about this peak to trough, but he did post a -28 in 08 which was much better than -37 s&p. and -36 for oakmark... pretty good for his style, esp given his affinity for financials. He was sitting in pfizer, humana wellpoint, boeing, northrup, and of course the albatros of shld. Haha. Link to comment Share on other sites More sharing options...
ni-co Posted September 2, 2014 Share Posted September 2, 2014 Richard Pzena on his top three bank picks: http://www.cnbc.com/id/101964478 The smartest money manager I know. Edit: I see that he's basically repeating his arguments from the Barron's interview I hadn't read, sorry. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted September 2, 2014 Share Posted September 2, 2014 The smartest money manager I know. Are you serious? His record is not that good. Here is an article from Nov 2007, where he touted Freddie Mac as the single cheapest stock that he has come across in his career. Freddie stock went to $0 less than a year later. http://www.kiplinger.com/article/investing/T038-C008-S001-long-term-value-in-freddie-mac.html Link to comment Share on other sites More sharing options...
finetrader Posted September 2, 2014 Share Posted September 2, 2014 Richard Pzena on his top three bank picks: http://www.cnbc.com/id/101964478 It's a long term view with two big IF: normalized interest rate, normalized trading revenue But his view that we are making 10% on investment while waiting for profit growth suit well with my thinking about these stocks. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted September 2, 2014 Share Posted September 2, 2014 I am saying that his long term record is not good (his John Hancock Classic Value fund trailed S&P 500 by about 3% annually over the past 10 years). I actually agree with his BAC pick. His fund owns between 30 and 40 stocks, so BAC may not make a big difference to his results. Link to comment Share on other sites More sharing options...
CorpRaider Posted September 3, 2014 Share Posted September 3, 2014 Maybe he's a member of his country club and he meant the smartest money manager he personally knows and has golfed with. Link to comment Share on other sites More sharing options...
ni-co Posted September 3, 2014 Share Posted September 3, 2014 Maybe he's a member of his country club and he meant the smartest money manager he personally knows and has golfed with. :D I wish this was the answer. It was a Greenblatt quote. So, no, I wasn't serious, but I think Greenblatt is. I don't have a strong view on Pzena. Link to comment Share on other sites More sharing options...
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