BAC-WT - Bank of America Warrants

[xazp]

NY-AG limitations:

http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=77305&terms=@ReutersTopicCodes+CONTAINS+%27ANV%27

 

... Schneiderman is constrained by a 2008 ruling that limits the AG's right to recovery in the name of investors who have already settled a federal-court class action. Freifeld said that the same holding, Spitzer v. Applied Card, may ultimately force the AG to drop claims for money damages against Bank of America in connection with its merger with Merrill Lynch and ...

 

He seems to do this a lot - sue or interfere in things where the ruling should be up to the investors themselves. 

[Olmsted]

A NY Attorney General's primary job is to get attention and look tough so he can run for governor later.  The law... whatever...

[dcollon]

This could probably be posted in a few different areas, but I thought this would be a good place to start.  It appears that Freddie is going out early with it's new modification plan.  Here is the link http://www.stockhouse.com/news/usreleasesdetail.aspx?n=8846665.

 

And here are some comments from an analyst:

 

Streamlined Modification Program— Freddie Mac announced an accelerated loan modification program scheduled to run through Aug ’15 for delinquent borrowers, which will offer a positive boost for MI’s, specialty servicers, & originators w/ legacy rep & warranty exposure. The program is focused on loans that are btwn 90 days & 24 months delinquent & will provide borrowers w/ a 4% interest rate, extend mortgages up to 40 years, & provide principal forbearance on loans w/ a MTMLTV ratio of 115%. Given the early adoption of this program by Freddie, we would anticipate an announcement from Fannie shortly.

 

• Positive impact on MI’s— We note that MI’s only payout a claim on a transfer of title following a foreclosure. Simply put, more modification = fewer foreclosures = fewer claims = fewer losses, a significant positive to legacy MI’s such as MTG, RDN, etc. 

 

• Positive impact on Servicers— Servicers receive incentive payments between $400—$1,200 per successfully modified loan in this program, a positive. Also dropping documentation requirements should reduce their expenses. However, we note this could increase the successful modifications at legacy servicers, reducing the number potential MSR transfers. Regardless, we view this as a positive for WAC, NSM etc.

 

• Positive impact on Originators— More mods= fewer foreclosures= fewer repurchase requests, which we think provides a boost to legacy originators, particularly FBC & PHH.

 

[ERICOPOLY]

 

Re: BAC-WT - Bank of America Warrants

« Reply #3656 on: May 07, 2013, 12:09:44 PM »

Quote

So it's almost at tangible book now, albeit 5 months late for Sanjeev's playful forecast."

 

True almost but there is still 6% upside roughly from today to hit tbv so still a ways to go.

Incidentally I think tbv will be about 13.66 when they report in about 9 weeks.

 

 

Only another 1.8% to go now.

[PlanMaestro]

Streamlined Modification Program— Freddie Mac announced an accelerated loan modification program scheduled to run through Aug ’15 for delinquent borrowers, which will offer a positive boost for MI’s, specialty servicers, & originators w/ legacy rep & warranty exposure. The program is focused on loans that are btwn 90 days & 24 months delinquent & will provide borrowers w/ a 4% interest rate, extend mortgages up to 40 years, & provide principal forbearance on loans w/ a MTMLTV ratio of 115%. Given the early adoption of this program by Freddie, we would anticipate an announcement from Fannie shortly.

 

Finally.

[nkp007]

The warrants now have one cent of intrinsic value!

[wescobrk]

Finally hit TBV! Well, one penny away. TBV was $13.46 but they probably lost 10 cents to the MBIA settlement so TBV now is $13.36 but should be about $13.56 when they report next quarter absent any litigation surprises.

 

BAC's Basel 3 should have went up from MBIA settlement (reduction of risk weighted) therefore Basel 3 next quarter should be about 9.7 or 120 basis points above what is needed 6 years from now. Is there any other large bank out there that has anywhere near that besides Bank of New York?

[xazp]

Is there any other large bank out there that has anywhere near that besides Bank of New York?  >>

 

Unfortunately, near as I can tell, there's the official Basel 3 requirements and some other requirements known only to the Fed and BAC itself.  And those extra requirements are particularly heavy with the so-called "bad banks" - C and BAC.  That's the only way I can really explain either C or BAC's way of handling the last CCAR in which both their and the Fed's numbers showed them having extra head-room to ask for much higher capital returns. 

 

 

Finally hit TBV! Well, one penny away. TBV was $13.46 but they probably lost 10 cents to the MBIA settlement so TBV now is $13.36 but should be about $13.56 when they report next quarter absent any litigation surprises.

 

BAC's Basel 3 should have went up from MBIA settlement (reduction of risk weighted) therefore Basel 3 next quarter should be about 9.7 or 120 basis points above what is needed 6 years from now. Is there any other large bank out there that has anywhere near that besides Bank of New York?

[ERICOPOLY]

Still only at tangible book.  The gift that keeps on giving.

 

[ERICOPOLY]

What's Berkowitz' cost basis on BAC?  I remember he paid about $14 more than 2 years ago in Q1 2011.

 

Imagine all this time and he is still sitting on a loss.  It's bizarre that they restrict his fund from buying more because he surely would have as it dropped and he should otherwise have a big gain here.

 

[PlanMaestro]

Imagine all this time and he is still sitting on a loss.  It's bizarre that they restrict his fund from buying more because he surely would have as it dropped and he should otherwise have a big gain here.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/fairholmeberkowitz/msg102474/#msg102474

[ERICOPOLY]

It's true that he doubled down implicitly but when he threw out C (which was initially a 5% position just like BAC) he then had a 10% position in BAC.  So while BAC had a big rebound since he implicitly doubled own, the loss on C was locked in.  Good move for taxes though.

 

[Uccmal]

Were at TBV.  Can someone save me a trip down memory lane here.

 

What is the goodwill primarily made up of?  I cant recall off the cuff but am thinking  ML, technology, and some brand related items. 

[Uccmal]

Were at TBV.  Can someone save me a trip down memory lane here.

 

What is the goodwill primarily made up of?  I cant recall off the cuff but am thinking  ML, technology, and some brand related items. 

 

Never mind.  I looked it up on Page 220 of the 10k.  It is spread across all businesses.  That makes it really hard to assess if there is any economic value in the goodwill and intangibles at all.  Back to a sum of the parts.

[plato1976]

Always wondering if we really should pay dollar for dollar for these goodwill stuff in BAC...

I have been quite patient holding bac, until today, b/c now it's above tangible book

 

for a "material" guy like me, I hate to pay some dollar for something "intangible"

call me short-sighted

 

Anyway, it's very tax inefficient in the US to invest in taxable accounts; so the best way is to continue to hold my BAC, until I find a really really amazing value

 

Were at TBV.  Can someone save me a trip down memory lane here.

 

What is the goodwill primarily made up of?  I cant recall off the cuff but am thinking  ML, technology, and some brand related items.

[nsa122]

I bought a 100% position at $7 in 8/2011, originally envisioned selling in 2015-2016 for ~$25, but sold out last week at $13.  Just curious how many people here are selling now, and if not, what price people would accept to sell tomorrow.

[ERICOPOLY]

Regarding the goodwill, I always figured that if they could earn $2 per share after smoke clears then those earnings are worth $20 (at least), once we get to that point.  That just happens to coincide with the book value.

 

It doesn't matter if they write off the intangibles, or if they keep them there.  Will have no impact on the stock.  It's all about the earnings, and nothing else.

 

 

 

 

 

[Liberty]

I bought a 100% position at $7 in 8/2011, originally envisioned selling in 2015-2016 for ~$25, but sold out last week at $13.  Just curious how many people here are selling now, and if not, what price people would accept to sell tomorrow.

 

Could you elaborate on the reasons why you didn't end up following your original plan and sold now? What changed your mind?

[ERICOPOLY]

I bought a 100% position at $7 in 8/2011, originally envisioned selling in 2015-2016 for ~$25, but sold out last week at $13.  Just curious how many people here are selling now, and if not, what price people would accept to sell tomorrow.

 

I probably won't sell it for several years.  I'll just buy puts which will be paid for by BAC's ongoing earnings.  In a portfolio margin account that frees up all of my buying power.

 

Then when the kids are out of school I'll spend a year as a resident of another state (with no capital gains tax).  Then I'll sell it as a non-resident of California.  Then I'll move back.

 

Same with the taxable MBI gains.

 

I'll bet the tax savings will pay for quite a bit beyond just those year's expenses  :)

 

[nsa122]

I can't say that any particular event changed my mind. I guess it ran up a bit faster than I expected and it just seems like the obvious/easy money is taken...transitioning from a priced-for-failure situation to one where future gains will depend on improved operating performance, which I agree will probably occur, but may not progress according to schedule and may or may not be recognized by a fickle market several years from now.  For it to double again from here in short order, I think that will depend on the company hitting on all cylinders and the market staying buoyant. From the viewpoint of a casual observer, we are still looking at a PE of 43 (I am aware that does not reflect reality), and I can't imagine it being valued higher than WFC on a market cap basis in the foreseeable future. I will certainly keep watching it.

[ERICOPOLY]

From the viewpoint of a casual observer, we are still looking at a PE of 43 (I am aware that does not reflect reality)

 

Yahoo Finance reports the forward P/E at 10.43.  That's what the casual observer sees (in addition to the trailing P/E that you mention).

[wescobrk]

Regarding the goodwill, I always figured that if they could earn $2 per share after smoke clears then those earnings are worth $20 (at least), once we get to that point.  That just happens to coincide with the book value.

 

It doesn't matter if they write off the intangibles, or if they keep them there.  Will have no impact on the stock.  It's all about the earnings, and nothing else.

 

It'll tank when the fed spools the market and that'll be a great time to buy more.

[wescobrk]

I mean when the fed spooks the market.

[wescobrk]

What the heck? My post didn't go through it only quoted eric.

 

Sorry for confusion.

 

Every idiot on the planet will want the stock when it raises the dividend into the 40's (cents) in march. We'll probably see 17 by then and 22 in march of 15.

[wescobrk]

and I can't imagine it being valued higher than WFC on a market cap basis in the foreseeable future"

 

I agree but with almost 65 billion to go to reach wf's valuation (assuming Wfc never goes any higher) there is still a ton of money to be made in BAC.