twacowfca Posted April 2, 2012 Share Posted April 2, 2012 Martin Cap advisors neg view on BofA see page 7 http://www.mcmadvisors.com/downloads/mcm_2011_annual_report__public_version.pdf That was a great letter Mr. B. thanks for sharing. The charts showing the massive destruction of shareholders' value by all the mega banks except WFC , which dramatically increased shareholders' value by passing on all the risky stuff and merely concentrating on blocking and tackling, were quite an eye opener. It's possible that the serial offenders will at some point repent and will never do that stuff again, but the evidence shows they aren't there yet. I can see why WEB likes the one that consistently avoided temptation and walked the straight and narrow. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted April 2, 2012 Share Posted April 2, 2012 That's true but the advantage of relatively more cautious managers is much greater during the optimistic periods than in the recovery stage. MCM management underestimates the significance of Moynihan's management, perhaps as a result of overstating the significance of the dividend screwup last year. Link to comment Share on other sites More sharing options...
twacowfca Posted April 2, 2012 Share Posted April 2, 2012 That's true but the advantage of relatively more cautious managers is much greater during the optimistic periods than in the recovery stage. MCM management underestimates the significance of Moynihan's management, perhaps as a result of overstating the significance of the dividend screwup last year. And then there was the observation in the letter that neither the CFO nor the Chief Accounting Officer were aware that the screwup had to be disclosed in their regulatory filings. I guess they left that detail to one of the lawyers and advisors that they pay almost one billion dollars a quarter to take care of such things. The amount they pay lawyers and financial advisors annually is almost as much as the actual and implied rent they pay on all their properties such as branches that are necessary to conduct business, according to Martin. Link to comment Share on other sites More sharing options...
treasurehunt Posted April 2, 2012 Share Posted April 2, 2012 I agree--the only point he seemed to have was on the FICA scores for 80 billion of the loans (compared to 120 billion of tier 1 equity), otherwise it seemed to be in the past (except for a reminder of the dividend issue, which I don't really care about). Wells Fargo has 88 billion of loans to people with FICO scores below 640 on their books, compared to 80 billion with FICO below 620 for BAC (see pages 148 and 158 in the Wells annual report for details). Wells has Tier 1 capital of 114 billion. Doesn't look like BAC is that much worse off than Wells on this metric that Martin cites as a concern. The 80 billion for BAC and the 88 billion for WFC both include PCI loans -- option ARMs from Golden West in the case of Wells and mainly Countrywide loans in the case of BAC -- which I believe means that many of these loans are already written down significantly. On page 7 of the letter, Martin mentions that BAC has 2.7 trillion in assets. The latest annual report shows just over 2.1 trillion in assets. Any idea how he got the 2.7 trillion number? Given all the research that he says he has done on the company, it can't just be a mistake, can it? Link to comment Share on other sites More sharing options...
sswan11 Posted April 2, 2012 Share Posted April 2, 2012 From 4/2/12 Credit Suisse report on BAC: ■ The impact of Basel III is meaningful for certain banks given the impact on certain investment and trading businesses. We expect that the large cap banks will meet the minimums within varying timelines. We view BAC as the bank requiring the longest time horizon to become compliant with fullyphased in B3 minimums. We expect BAC to reach its 9.0% target in 2H’14 which represent our estimate of the fully phased-in minimum, inclusive of an estimated 200bp SIFI buffer. ■ We are forecasting a 7.1% Basel III Tier 1 ratio by year-end 2012. Given the company’s capital positioning, Bank of America did not request any capital management activities with the 2012 CCAR process. The company continues to optimize the balance–which has included sales of financial stakes, as well as sales of MSRs and RWA mitigation. We estimate an improvement in regulatory capital ratios as capital deductions become smaller as MSRs and DTAs wind-down and RWA mitigation continues. Link to comment Share on other sites More sharing options...
sswan11 Posted April 2, 2012 Share Posted April 2, 2012 Management Guidance: Bank of America provided guidance of Basel III Tier 1 common ratio of 7.25-7.5% by year-end 2012. Our 2012 Basel III estimate of 7.1% comes in lower than management guidance as we factored in negative ACOI, while we estimate that management guidance includes a $0 AOCI balance. Link to comment Share on other sites More sharing options...
ShahKhezri Posted April 2, 2012 Share Posted April 2, 2012 I agree--the only point he seemed to have was on the FICA scores for 80 billion of the loans (compared to 120 billion of tier 1 equity), otherwise it seemed to be in the past (except for a reminder of the dividend issue, which I don't really care about). Wells Fargo has 88 billion of loans to people with FICO scores below 640 on their books, compared to 80 billion with FICO below 620 for BAC (see pages 148 and 158 in the Wells annual report for details). Wells has Tier 1 capital of 114 billion. Doesn't look like BAC is that much worse off than Wells on this metric that Martin cites as a concern. The 80 billion for BAC and the 88 billion for WFC both include PCI loans -- option ARMs from Golden West in the case of Wells and mainly Countrywide loans in the case of BAC -- which I believe means that many of these loans are already written down significantly. On page 7 of the letter, Martin mentions that BAC has 2.7 trillion in assets. The latest annual report shows just over 2.1 trillion in assets. Any idea how he got the 2.7 trillion number? Given all the research that he says he has done on the company, it can't just be a mistake, can it? Only difference is Wells doesn't stuff everyones mail box with credit card offers, it's a cross sell. For everone else, this unsecured debt to below avg. fico scores is a risk. Link to comment Share on other sites More sharing options...
vinod1 Posted April 2, 2012 Share Posted April 2, 2012 I agree--the only point he seemed to have was on the FICA scores for 80 billion of the loans (compared to 120 billion of tier 1 equity), otherwise it seemed to be in the past (except for a reminder of the dividend issue, which I don't really care about). Wells Fargo has 88 billion of loans to people with FICO scores below 640 on their books, compared to 80 billion with FICO below 620 for BAC (see pages 148 and 158 in the Wells annual report for details). Wells has Tier 1 capital of 114 billion. Doesn't look like BAC is that much worse off than Wells on this metric that Martin cites as a concern. The 80 billion for BAC and the 88 billion for WFC both include PCI loans -- option ARMs from Golden West in the case of Wells and mainly Countrywide loans in the case of BAC -- which I believe means that many of these loans are already written down significantly. On page 7 of the letter, Martin mentions that BAC has 2.7 trillion in assets. The latest annual report shows just over 2.1 trillion in assets. Any idea how he got the 2.7 trillion number? Given all the research that he says he has done on the company, it can't just be a mistake, can it? He is very likely including off balance sheet items such as loan commitments and standby letters of credit/commercial letters of credit. Very roughly from memory this is around $500 billion. This would be detailed in the foot notes if you are interested in with something like "contingencies". Vinod Link to comment Share on other sites More sharing options...
treasurehunt Posted April 2, 2012 Share Posted April 2, 2012 He is very likely including off balance sheet items such as loan commitments and standby letters of credit/commercial letters of credit. Very roughly from memory this is around $500 billion. This would be detailed in the foot notes if you are interested in with something like "contingencies". Vinod Good guess. From Note 14 of the annual report, BAC has almost $450 billion of "legally binding commitments" and another $450 billion of unused credit card lines. Maybe Martin is including the legally binding commitments in total assets. I don't think Martin's letter made a very good bear case against BAC, but he did get me to take a closer look at the BAC annual report. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted April 3, 2012 Share Posted April 3, 2012 I agree--the only point he seemed to have was on the FICA scores for 80 billion of the loans (compared to 120 billion of tier 1 equity), otherwise it seemed to be in the past (except for a reminder of the dividend issue, which I don't really care about). Wells Fargo has 88 billion of loans to people with FICO scores below 640 on their books, compared to 80 billion with FICO below 620 for BAC (see pages 148 and 158 in the Wells annual report for details). Wells has Tier 1 capital of 114 billion. Doesn't look like BAC is that much worse off than Wells on this metric that Martin cites as a concern. The 80 billion for BAC and the 88 billion for WFC both include PCI loans -- option ARMs from Golden West in the case of Wells and mainly Countrywide loans in the case of BAC -- which I believe means that many of these loans are already written down significantly. On page 7 of the letter, Martin mentions that BAC has 2.7 trillion in assets. The latest annual report shows just over 2.1 trillion in assets. Any idea how he got the 2.7 trillion number? Given all the research that he says he has done on the company, it can't just be a mistake, can it? Only difference is Wells doesn't stuff everyones mail box with credit card offers, it's a cross sell. For everone else, this unsecured debt to below avg. fico scores is a risk. I think MCM referred specifically to < 620 FICO of residential mortgages (secured and unsecured). Ex-PCI and insured loans, BAC and WFC are pretty similar at around 15% below 620/640. The point he misses is the thing that Berkowitz keeps saying: what are likely losses relative to PPTP. The declining NIM and the presumably temporary non-interest expense level is still mitigated by estimating a conservative range of PPTP to likely losses relative to price. Link to comment Share on other sites More sharing options...
twacowfca Posted April 3, 2012 Share Posted April 3, 2012 I agree--the only point he seemed to have was on the FICA scores for 80 billion of the loans (compared to 120 billion of tier 1 equity), otherwise it seemed to be in the past (except for a reminder of the dividend issue, which I don't really care about). Wells Fargo has 88 billion of loans to people with FICO scores below 640 on their books, compared to 80 billion with FICO below 620 for BAC (see pages 148 and 158 in the Wells annual report for details). Wells has Tier 1 capital of 114 billion. Doesn't look like BAC is that much worse off than Wells on this metric that Martin cites as a concern. The 80 billion for BAC and the 88 billion for WFC both include PCI loans -- option ARMs from Golden West in the case of Wells and mainly Countrywide loans in the case of BAC -- which I believe means that many of these loans are already written down significantly. On page 7 of the letter, Martin mentions that BAC has 2.7 trillion in assets. The latest annual report shows just over 2.1 trillion in assets. Any idea how he got the 2.7 trillion number? Given all the research that he says he has done on the company, it can't just be a mistake, can it? There isn't a dramatic difference in those FICO scores, but how did they get these bad loans? A lot of BAC's bad mortgages came with the Countrywide acquisition that has caused a massive destruction of shareholder value. The great majority of WFC's bad mortgages came from the Wacovia acquisition that has produced a huge increase in WFC's IV and ultimately an increase in their IV per share. The Wacovia acquisition was a classic good bank / bad bank deal. The Wacovia good bank part of the deal doubled WFC's deposits through a conservative banking culture. The bad bank Golden West part of the deal was the source of most of the bad mortgages. That was the price WFC had to pay to get the good bank, Wacovia. :) Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 4, 2012 Share Posted April 4, 2012 Where we are on the Article 77 litigation? http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=44099&terms=@ReutersTopicCodes+CONTAINS+'ANV' http://newsandinsight.thomsonreuters.com/Legal/News/2012/04_-_April/Does_Pauley_s_BNYM_ruling_spell_new_liability_for_MBS_trustees_/ Link to comment Share on other sites More sharing options...
sswan11 Posted April 5, 2012 Share Posted April 5, 2012 Dick Bove likes MS and still likes BAC throughout the summer: http://www.cnbc.com/id/46971027 Link to comment Share on other sites More sharing options...
racemize Posted April 6, 2012 Share Posted April 6, 2012 anyone have any strong opinions on the shareholder votes/directors? I'm reading through the material now, but if anyone's already given it some thought, please post! Link to comment Share on other sites More sharing options...
CONeal Posted April 7, 2012 Share Posted April 7, 2012 anyone have any strong opinions on the shareholder votes/directors? I'm reading through the material now, but if anyone's already given it some thought, please post! Voted with management with the exception of #6 Execs being required to hold large portions of stock. Link to comment Share on other sites More sharing options...
sswan11 Posted April 9, 2012 Share Posted April 9, 2012 NYTimes on BAC vs C: http://www.nytimes.com/2012/04/09/business/taking-the-measure-of-citigroup-and-bank-of-america.html?ref=business Link to comment Share on other sites More sharing options...
WarrenWatsa Posted April 9, 2012 Share Posted April 9, 2012 "Both trade at about 70 percent of book value, and both have been steadily increasing their capital levels since the dark days of 2008." ? BAC is at 0.46 P/B while C is at 0.57 P/B. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted April 9, 2012 Share Posted April 9, 2012 The word "tangible" was omitted. .7x is correct. Link to comment Share on other sites More sharing options...
benchmark Posted April 17, 2012 Share Posted April 17, 2012 How about Jan 14 in the money call? $7 call is trading at around $3.15. It seems an easy double or tripple, comparing to the common? Link to comment Share on other sites More sharing options...
lessthaniv Posted April 17, 2012 Share Posted April 17, 2012 How about Jan 14 in the money call? $7 call is trading at around $3.15. It seems an easy double or tripple, comparing to the common? I own some $10 & $12's. Both strikes below TBV and more leverage. Link to comment Share on other sites More sharing options...
tombgrt Posted April 19, 2012 Share Posted April 19, 2012 Kinda quiet here. Not sure why! http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-newsArticle&ID=1684843&highlight= Link to comment Share on other sites More sharing options...
racemize Posted April 19, 2012 Share Posted April 19, 2012 I missed the call, anything of note? e.g., any news on Reps and Warranties front? Link to comment Share on other sites More sharing options...
Parsad Posted April 19, 2012 Share Posted April 19, 2012 They are just killing it from a balance sheet perspective. I think they will hit Basel III by the end of this year! No reason whatsoever this thing should be trading at anything less than tangible book. European exposure down to $9.8B! Cheers! Link to comment Share on other sites More sharing options...
keerthiprasad Posted April 19, 2012 Share Posted April 19, 2012 Agreed. They are continuing to move in the right direction. I'm actually surprised we didn't see a positive bump in the share price today. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 19, 2012 Share Posted April 19, 2012 Capital ratios doing great, profitable, cheap. Stay the course. Link to comment Share on other sites More sharing options...
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