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BAC-WT - Bank of America Warrants

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ERICOPOLY Newbie

ERICOPOLY

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The impact for BAC could be less than 2% or may be even 1%.WSJ says that the surcharge could be 2% over the Basel requirement but then will depend upon the short term funding. If the requirement would be 2% for GS, it would be less than 2% for deposit banks.

Again we do not the timing of the implementation of the new requirements. It could be 2019 like Basel requirement.

 

A 2% surcharge would take BAC to a 10.5% fully-phased-in Basel3 ratio.

 

They should be hitting that under "Standardized" approach roughly by end of Q1 2015 (or perhaps end of Q4'14 under the "Advanced" approach).  So in theory they would still be able to return all of the capital they generate beyond that point. 

 

The trouble is "that point" just keeps getting kicked further and further down the road.

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xazp Newbie

xazp

Posted
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CFO was asked about it today.  And his response sounds right.  The most strict constraint is probably still CCAR, so the fact that the maximum might get raised doesn't impact very much.  CCAR is the limiting factor on capital returns so that's what counts. 

 

 

A 2% surcharge would take BAC to a 10.5% fully-phased-in Basel3 ratio.

 

They should be hitting that under "Standardized" approach roughly by end of Q1 2015 (or perhaps end of Q4'14 under the "Advanced" approach).  So in theory they would still be able to return all of the capital they generate beyond that point. 

 

The trouble is "that point" just keeps getting kicked further and further down the road.

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meiroy Newbie

meiroy

Posted
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In one of the more closely followed numbers Monday, Citigroup predicted that its so-called Tier 1 common ratio would fall to 8.4% if a severe recession were to take place over the next two years. The projected ratio—which measures financial strength by comparing a bank's high-quality capital with its risk-weighted assets—was 9.1% under the bank's own stress test last year.

 

Meanwhile, J.P. Morgan Chase & Co. said its capital levels under a hypothetical economic downturn would be 8.4%, down from an 8.5% projection a year ago.

 

Morgan Stanley MS +0.57% projected its ratio would fall to 8.9% in a harsh recession, down from a 9.5% projection last year.

 

Goldman projected its ratio would be 10.1%, compared with an 8.9% projection last year.

 

Wells Fargo WFC +0.46% & Co., meanwhile, projected its ratio would be 9.6%, compared with a 9.9% projection last year.

 

Bank of America Corp. BAC -0.30% on Monday predicted it would have the same capital level—8.4%—under a stressed scenario as it did last year. Under the latest scenario however, the Charlotte, N.C., lender created a tougher hypothetical recession for itself on certain fronts.

 

For instance, Bank of America's latest adverse scenario features a U.S. economy with home prices declining 25%, compared with a 21% predicted drop a year ago. It also includes a 5.9% decline in Eurozone real GDP, compared with a 5% decline in the year-ago scenario.

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Andy Dufresne Newbie

Andy Dufresne

Posted
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BAC report out - here is a quote of the summary (I stressed the results in red) from p. 6 of the presentation - see here:

 

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTU1MTEwfENoaWxkSUQ9MjUxNjI3fFR5cGU9MQ==&t=1

 

BHC Severely Adverse – BAC Results

 

A $36.4B cumulative pre-tax loss was projected over the specified nine-quarter horizon under the BHC Severely

Adverse scenario.

• Material impacts to earnings included loan and lease losses ($28.1B), incremental build in allowance for loan and

lease losses ($12.0B), trading and counterparty losses ($16.5B), goodwill impairment ($5.1B which are excluded

from regulatory capital) and other losses ($6.2B), partially offset by $31.3B of PPNR and other revenues of $0.6B.

• Due to the impact of the hypothetical pre-tax losses, the deferred tax asset (“DTA”) increased, resulting in a

higher disallowed DTA which reduced capital and capital ratios.

• Risk-weighted assets declined primarily driven by a reduction in credit risk-weighted assets resulting from

reduced loan demand consistent with the severely adverse macroeconomic conditions of the scenario, partially

offset by an increase in market risk-weighted assets resulting from the stressed market and economic conditions.

• The Basel 1 Tier 1 Common Capital ratio declined from 10.8% at March 31, 2014 to an estimate in the BHC

Severely Adverse scenario of 8.4% at its lowest point and 9.0% at June 30, 2016.

• Under Basel 3 Transition, the estimated lowest stress ratios over the nine-quarter horizon for Common Equity Tier

1 Capital, Tier 1 Capital, Total Capital and Tier 1 Leverage were 8.2%, 8.5%, 10.7% and 5.5%, respectively.

• BAC maintains capital above required regulatory minimums in all baseline and stress scenarios under both Basel 1

and Basel 3 Standardized Transition (“B3S”) rules. The required regulatory minimums are provided for reference

on page 18.

• Global Excess Liquidity Sources increased in the BHC Severely Adverse scenario from $426.7B at March 31, 2014

to $462.7B at June 30, 2016, primarily due to an increase in bank liquidity. Parent liquidity declined from $94.7B

at March 31, 2014 to $57.9B at June 30, 2016 and resulted in a time to required funding (“TTF”) decline from 35

months to 21 months.

B

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jay21 Newbie

jay21

Posted
Posted

For those of you with overly large BAC positions...at what point will you start lightening up?

 

Probably either too early or too late...

 

But in seriousness, I promised myself to take a long look when it crosses $20 as I think once you start getting past BV you are betting on the BoA franchise, which I thought was there when I initiated. Obviously, I am always monitoring, but I basically want to start my analysis from scratch when it crosses BV.

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rkbabang Newbie

rkbabang

Posted
Posted

For those of you with overly large BAC positions...at what point will you start lightening up?

 

Probably either too early or too late...

 

But in seriousness, I promised myself to take a long look when it crosses $20 as I think once you start getting past BV you are betting on the BoA franchise, which I thought was there when I initiated. Obviously, I am always monitoring, but I basically want to start my analysis from scratch when it crosses BV.

 

Book value has been my target as well.  I still plan on holding BAC for a long time, but not as large a position as I have now and not as leveraged.

 

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longtermdave Newbie

longtermdave

Posted
Posted

 

This part was interesting:

 

Goldman notes that while consolidation has already run its course among big U.S. banks, remaining players are moving out of business lines where their share is low and focusing on ones where they dominate, which has the same effect as mergers: reducing competition and driving profits higher. It sees BofA as underowned; its weighting in mutual funds relative to its weighting in the Standard & Poor's 500 index is the second lowest among 25 large financials, ahead of only Berkshire Hathaway (BRK.B).

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mankap Newbie

mankap

Posted
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BAC would have saved Billions had they waited couple of weeks for Eric Holders resignation. But I think it was right thing to settle and move on

 

Holder’s departure signals end of big mortgage cases

Sep 25 2014, 15:09 ET | By: Carl Surran, SA News Editor  Contact this editor with comments or a news tip

Today's resignation of Attorney General Eric Holder could mark the beginning of the end of the Justice Department’s push to hold big banks accountable for their conduct leading up to the financial crisis.Several big banks, including Goldman Sachs (GS -2.1%) and Wells Fargo (WFC -1.1%), are still under investigations by the Justice Department for their sale of flawed mortgage securities before 2008, but settlements in those cases are expected to be much smaller than the big sums extracted from Bank of America (BAC -1.8%), JPMorgan Chase (JPM -2%) and Citigroup (C -2.2%).Another sign that the big bank cases may be winding down: Tony West, who was Holder’s point man in the bank settlement talks, recently left the Justice Department to join PepsiCo as its general counsel.

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xazp Newbie

xazp

Posted
Posted

I think that's backwards.  I think holder was waiting for bac to settle before he resigned.

 

BAC would have saved Billions had they waited couple of weeks for Eric Holders resignation. But I think it was right thing to settle and move on

 

Holder’s departure signals end of big mortgage cases

Sep 25 2014, 15:09 ET | By: Carl Surran, SA News Editor  Contact this editor with comments or a news tip

Today's resignation of Attorney General Eric Holder could mark the beginning of the end of the Justice Department’s push to hold big banks accountable for their conduct leading up to the financial crisis.Several big banks, including Goldman Sachs (GS -2.1%) and Wells Fargo (WFC -1.1%), are still under investigations by the Justice Department for their sale of flawed mortgage securities before 2008, but settlements in those cases are expected to be much smaller than the big sums extracted from Bank of America (BAC -1.8%), JPMorgan Chase (JPM -2%) and Citigroup (C -2.2%).Another sign that the big bank cases may be winding down: Tony West, who was Holder’s point man in the bank settlement talks, recently left the Justice Department to join PepsiCo as its general counsel.

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txlaw Newbie

txlaw

Posted
Posted

I think that's backwards.  I think holder was waiting for bac to settle before he resigned.

 

BAC would have saved Billions had they waited couple of weeks for Eric Holders resignation. But I think it was right thing to settle and move on

 

Holder’s departure signals end of big mortgage cases

Sep 25 2014, 15:09 ET | By: Carl Surran, SA News Editor  Contact this editor with comments or a news tip

Today's resignation of Attorney General Eric Holder could mark the beginning of the end of the Justice Department’s push to hold big banks accountable for their conduct leading up to the financial crisis.Several big banks, including Goldman Sachs (GS -2.1%) and Wells Fargo (WFC -1.1%), are still under investigations by the Justice Department for their sale of flawed mortgage securities before 2008, but settlements in those cases are expected to be much smaller than the big sums extracted from Bank of America (BAC -1.8%), JPMorgan Chase (JPM -2%) and Citigroup (C -2.2%).Another sign that the big bank cases may be winding down: Tony West, who was Holder’s point man in the bank settlement talks, recently left the Justice Department to join PepsiCo as its general counsel.

 

Yeah, I'd agree with that. 

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rohitc99 Newbie

rohitc99

Posted
Posted

 

For a minute I thought it said "agreed to pay 7.65 Billion to settle charges".  I guess I am conditioned to expect billion dollar settlements for every damn thing :)

maybe the bank even offered to pay 7.65 Bn, then realized that it was only millions being asked. whats a billion here, billion there :)

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Grenville Newbie

Grenville

Posted
Posted

Bank of America Board Gives Chairman Job to Brian Moynihan

 

Chad Holliday, BofA's Previous Chairman, to Stay on Board

 

http://online.wsj.com/articles/bank-of-america-board-gives-chairman-job-to-brian-moynihan-1412196657?mod=WSJ_hp_LEFTWhatsNewsCollection

 

Gets my thumbs up. I can't say I agree with everything Brian has done, but his background and work since taking over has gotten BAC pretty far.

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