BAC-WT - Bank of America Warrants

[Liberty]

if a value investor - price to tangible book value

if a growth investor - return on tangible book value

 

Buffett has always said that growth was a component of value. I don't think the line can be drawn there that easily.

[kevin4u2]

if a value investor - price to tangible book value

if a growth investor - return on tangible book value

 

Buffett has always said that growth was a component of value. I don't think the line can be drawn there that easily.

 

One is concerned with price and one is not. Obviously a value investor would consider the return on equity but it would extend to the price he/she would be willing to pay.

[Guest 50centdollars]

What do you guys think about the warrants right now? Do you think is prudent to continue to buy them or should you go long the common?

[Liberty]

if a value investor - price to tangible book value

if a growth investor - return on tangible book value

 

Buffett has always said that growth was a component of value. I don't think the line can be drawn there that easily.

 

One is concerned with price and one is not. Obviously a value investor would consider the return on equity but it would extend to the price he/she would be willing to pay.

 

Ah, now I see what you meant. I interpreted it differently.

[wescobrk]

It'll be pretty funny if Moynihan uses most of the 3.1 billion remaining while the stock is twenty percent above tangible book.

He bought 900 million last quarter when it was much cheaper.

It'll be interesting if he purchases higher at a higher stock price such as close to 2 billion for q4.

[obtuse_investor]

There is no guarantee that BAC would exhaust the allowed amount on buybacks. Most businesses don't.

 

It is unfortunate and a squandered opportunity.

 

However, I hope that their focus is really on strengthening the long term earnings power of the organization.

[Guest Dazel]

 

He is waiting for the $8.5b decision as would I.

 

A Buy back now is much below book value...it is magic in the numbers buying below book and selling above.....Fairfax have made a career out of it. you have never Fairfax talk about their tangible book value.

 

Book value is $20.50 a share.

 

Time to look forward not back.

 

Dazel.

[wescobrk]

 

He is waiting for the $8.5b decision as would I.

 

A Buy back now is much below book value...it is magic in the numbers buying below book and selling above.....Fairfax have made a career out of it. you have never Fairfax talk about their tangible book value.

 

Book value is $20.50 a share.

 

Time to look forward not back.

 

Dazel.

 

It doesn't matter much this year with about 3 percent of the market cap but it could matter a lot more if bac gets 10 or 15 billion auth in the future.

Bac will do well regardless but it just offends my sensibilities when he does odd things like the Buffett deal and giving employees stock instead of cash.

I should be more like Icahn when he said he doesn't dislike reed Hastings after he made several times his money.

I've made a lot with bac so I should probably give the guy a break.

It's rare to be good at several things such as operations and capital deployment.

Moynihan is good at the former and he has done a good job considering his circumstances.

[bennycx]

if a value investor - price to tangible book value

if a growth investor - return on tangible book value

 

Buffett has always said that growth was a component of value. I don't think the line can be drawn there that easily.

 

One is concerned with price and one is not. Obviously a value investor would consider the return on equity but it would extend to the price he/she would be willing to pay.

 

true, but a bank with a higher return on tangible equity deserve to trade at a better price to tangible book, and if this is persistent for a long time for whatever reason, the price should trade much higher too

[xazp]

For me, I just compare the current price to the TBV in a few years.  If there's a big gap - due to either large growth or due to the stock trading below TBV, that metric will find it. 

 

 

if a value investor - price to tangible book value

if a growth investor - return on tangible book value

 

Buffett has always said that growth was a component of value. I don't think the line can be drawn there that easily.

 

One is concerned with price and one is not. Obviously a value investor would consider the return on equity but it would extend to the price he/she would be willing to pay.

 

true, but a bank with a higher return on tangible equity deserve to trade at a better price to tangible book, and if this is persistent for a long time for whatever reason, the price should trade much higher too

[Guest Dazel]

 

 

Have you seen the goodwill on Berkshire's balance sheet?

 

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.

 

Bank of America and Merrill Lynch are two of those most recognized brands on the planet...we can move on from tangible book...we are not in liquidation anymore.

 

Dazel.

[Uccmal]

What do you guys think about the warrants right now? Do you think is prudent to continue to buy them or should you go long the common?

 

If you believe as I do that the market is going to front end load the stock price ahead of the earnings then I would say neither.  On pullbacks I will be buying 2016 Leaps.  Right now, or at least after January 1 I will be exiting my warrants in favour of common and 2016s. 

 

Obviously from $5.00 to 16, a good chunk of the easy money has been made.  The next piece from 16 to 22,23 is still fairly easy.  After that, I will be down to a 10% or less position, if we get there. 

[Uccmal]

 

 

Have you seen the goodwill on Berkshire's balance sheet?

 

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.

 

Bank of America and Merrill Lynch are two of those most recognized brands on the planet...we can move on from tangible book...we are not in liquidation anymore.

 

Dazel.

 

Well said.  Jpm and wells are both trading at premiums to their book.  Its interesting how Jpm has shot up after that settlement.  BAC should do the same shortly.

[xazp]

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.  >>

 

That's because Buffett is one of the best acquirers of all times.  In aggregate, it's pretty clear that the actual value of his holdings exceeds the price he paid.  So book value is a conservative valuation for his company. 

 

BAC arguably made one of the worst acquisitions of all time (Countrywide).  Over time they've made a series of high-priced banking acquisitions.  I view BAC as a poor acquirer, and thus, I don't think their goodwill has much value.  Moynihan has spent the last several years un-winding and un-doing the damage from all their acquisitions. 

 

The good news is: BAC is not going to acquire anything substantial for a long, long time.  I'm quite happy the regulators have tied their hands here.

 

 

 

 

 

Have you seen the goodwill on Berkshire's balance sheet?

 

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.

 

Bank of America and Merrill Lynch are two of those most recognized brands on the planet...we can move on from tangible book...we are not in liquidation anymore.

 

Dazel.

[Uccmal]

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.  >>

 

That's because Buffett is one of the best acquirers of all times.  In aggregate, it's pretty clear that the actual value of his holdings exceeds the price he paid.  So book value is a conservative valuation for his company. 

 

BAC arguably made one of the worst acquisitions of all time (Countrywide).  Over time they've made a series of high-priced banking acquisitions.  I view BAC as a poor acquirer, and thus, I don't think their goodwill has much value.  Moynihan has spent the last several years un-winding and un-doing the damage from all their acquisitions. 

 

The good news is: BAC is not going to acquire anything substantial for a long, long time.  I'm quite happy the regulators have tied their hands here.

 

 

 

 

 

Have you seen the goodwill on Berkshire's balance sheet?

 

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.

 

Bank of America and Merrill Lynch are two of those most recognized brands on the planet...we can move on from tangible book...we are not in liquidation anymore.

 

Dazel.

 

Xazp, I haven't paid much attention to the source of goodwill on BACs balance sheet.  I will take a look when I get a chance.  I have been operating to TBV until now. 

 

Wouldn't the goodwill attributed to Countrywide be written down by now?  Or am I confusing IFRS with Gaap?

 

Secondly, the goodwill attributable to Merrill and other earlier acquisitions, say Fleet, would still be valid, and maybe even understated at this point.  I have guessed ML at 100 B, if it were calved off.  That makes up 2/3 of the present market cap.  Even at its purchase value of 50 B. ML would be nearly a 3rd on sum of the parts - granted that is not goodwill which would have been negative. 

 

Just saying that in balance TBV may not be any more relevant than book value in the case of BAC.

[xazp]

I'm happy with Merrill, but they way overpaid at the time.  They could have gotten either for much cheaper, and with government loss-sharing.  Look at how JPM, WFC, Berkshire did their financial crisis acquisitions - they were patient, smart and the sellers had to accept whatever they could get.  BAC jumped at both, and paid a premium about what they should have. 

 

To the official costs of ML/CFC, you have to add waves of dilution.  The US government dilution was very expensive, at low prices.  This is why you have your warrants.  Then they gave Buffett his pound of flesh.  When you add up the severe dilution that BAC has gone through, yes, I think BAC is a poor acquirer. 

 

Put it this way: would BAC be at a higher or lower price today absent their CFC/ML acquisitions?  I would say BAC would be much higher.  It was a $60 stock before the acquisitions. 

 

This is all fine with me, because I came in after BAC had fallen.  But anyone who help BAC for a long time.  In the late 90's it was a $30 stock.  I think absent any acquisitions, it'd be worth > $30 today.  With them, about half. 

 

 

 

 

 

 

 

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.  >>

 

That's because Buffett is one of the best acquirers of all times.  In aggregate, it's pretty clear that the actual value of his holdings exceeds the price he paid.  So book value is a conservative valuation for his company. 

 

BAC arguably made one of the worst acquisitions of all time (Countrywide).  Over time they've made a series of high-priced banking acquisitions.  I view BAC as a poor acquirer, and thus, I don't think their goodwill has much value.  Moynihan has spent the last several years un-winding and un-doing the damage from all their acquisitions. 

 

The good news is: BAC is not going to acquire anything substantial for a long, long time.  I'm quite happy the regulators have tied their hands here.

 

 

 

 

 

Have you seen the goodwill on Berkshire's balance sheet?

 

I have never heard Buffett talk about the tangible book value of Berkshire. His entire yard stick for the history of the company is the growth in book value.

 

Bank of America and Merrill Lynch are two of those most recognized brands on the planet...we can move on from tangible book...we are not in liquidation anymore.

 

Dazel.

 

Xazp, I haven't paid much attention to the source of goodwill on BACs balance sheet.  I will take a look when I get a chance.  I have been operating to TBV until now. 

 

Wouldn't the goodwill attributed to Countrywide be written down by now?  Or am I confusing IFRS with Gaap?

 

Secondly, the goodwill attributable to Merrill and other earlier acquisitions, say Fleet, would still be valid, and maybe even understated at this point.  I have guessed ML at 100 B, if it were calved off.  That makes up 2/3 of the present market cap.  Even at its purchase value of 50 B. ML would be nearly a 3rd on sum of the parts - granted that is not goodwill which would have been negative. 

 

Just saying that in balance TBV may not be any more relevant than book value in the case of BAC.

[dcollon]

Bank of America announces agreement with Freddie Mac on mortgage repurchase claims

Monday, December 02, 2013 12:32:28 PM (GMT)

 

 

Bank of America announced an agreement with the Federal Home Loan Mortgage Corporation (Freddie Mac) to resolve all remaining representations and warranties claims for residential mortgage loans sold to Freddie Mac through the end of 2009.

Under terms of the agreement, Bank of America will pay Freddie Mac a total of $404M (less credits of $13M) to resolve all outstanding and potential mortgage repurchase and make-whole claims related to loans sold to Freddie Mac from 1-Jan-00 to December 31, 2009, and to compensate Freddie Mac for certain past losses and potential future losses relating to denials, rescissions and cancellations of mortgage insurance.

The payments are fully covered by existing reserves as of 30-Sep-13.

With this settlement, Bank of America has resolved all outstanding and potential representations and warranties claims on whole loans sold by legacy Bank of America and Countrywide to Fannie Mae and Freddie Mac through the dates outlined above, subject to certain exceptions which Bank of America does not believe are material.

Today’s agreement does not cover loan servicing obligations, loans contained in private label securitizations or securities and disclosure claims.

[ourkid8]

http://www.cnbc.com/id/101241019?__source=yahoo%257cfinance%257cheadline%257cheadline%257cstory&par=yahoo&doc=101241019%257cUS+bank+stocks+could+rall

 

US bank stocks could rise as much as 25-30% next year.  That is inline with the returns we anticipate from BAC.

 

Tks,

S

[gary17]

So just want to drop a line to thank all for answering my questions and sharing thoughts. I've taken a small but large-ish position relative to my nw in bac...

I think America as a company is like an owner operator - ppl who work in the US generally want to live and retire in the US.... quite a contrast to China for example... anyway, think the US should do well and banks should benefit.  And having been stress tested many times probably means it should do ok... my margin of safety.  as always, price  drops after I buy lol.

 

[OracleofCarolina]

http://finance.yahoo.com/news/bank-america-present-goldman-sachs-190000021.html

 

Moynihan presenting next Tuesday

[nikhil25]

Ditto. I've been a silent reader on the BAC thread and have really benefited from everyone's insights.

 

as always, price  drops after I buy lol.

 

Makes it the two of us. Haha ;)

[ERICOPOLY]

Does anyone have an idea as to the normalized revenue from mortgage servicing?  We've only heard them talk about normalized cost.

 

Their servicing revenue fell over the past year when they sold a lot of the servicing rights.  Are they planning on fully replacing it with organically originated loans, to be built up over time?  Or is there some sort of plan to simply never let the servicing portfolio get larger than a given size again?

[meiroy]

http://www.cnbc.com/id/101241019?__source=yahoo%257cfinance%257cheadline%257cheadline%257cstory&par=yahoo&doc=101241019%257cUS+bank+stocks+could+rall

 

US bank stocks could rise as much as 25-30% next year.  That is inline with the returns we anticipate from BAC.

 

Tks,

S

 

When JPM got bashed, near the bottom I switched from BAC.  If the proverbial shit hits the fan I think they will be in a far better position. Also loaded on WFC 2016 leaps in October, those were so cheap with delicious spreads... again, with far less need to worry or protect the downside, I don't even have one put.

 

[gary17]

The last paragraph seems to suggest they still think its important

 

http://online.wsj.com/news/articles/SB10001424052702303722604579113651567084922

[vinod1]

Does anyone have an idea as to the normalized revenue from mortgage servicing?  We've only heard them talk about normalized cost.

 

Their servicing revenue fell over the past year when they sold a lot of the servicing rights.  Are they planning on fully replacing it with organically originated loans, to be built up over time?  Or is there some sort of plan to simply never let the servicing portfolio get larger than a given size again?

 

Difficult to say what the normalized revenue is for servicing, but it is dropping fast. It is $699 million in Q3 and $2400 million YTD. This is provided in the earnings supplement (page 27).

 

They plan to get rid of servicing loans they have not originated. So once all the loans that they bought are gone, they would be just keeping the loans they originate. Originations are about $25 billion per quarter over the last few quarters but since this varies with mortgage rates. Moynihan has mentioned that he wants to grow the share of originations from 5% so I would expect loans to increase but cannot really translate this into a normalized number.

 

Vinod