bmichaud Posted April 19, 2012 Share Posted April 19, 2012 Earnings transcript if anyone is interested.... Adjusted PTPP earnings look great! Reported FTE PTPP was $3.3B versus $9.4B after adjusting for debt/trps repurchase gains, FVA and DVA, R&W provision, non-core LAS NIE and preferred dividends. BAC_1Q12_CC.pdf Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 19, 2012 Share Posted April 19, 2012 Earnings transcript if anyone is interested.... Adjusted PTPP earnings look great! Reported FTE PTPP was $3.3B versus $9.4B after adjusting for debt/trps repurchase gains, FVA and DVA, R&W provision, non-core LAS NIE and preferred dividends. Thanks for the transcript! Where did you find the adjusted PTPP? Page 5 shows some one time gains too. Link to comment Share on other sites More sharing options...
racemize Posted April 19, 2012 Share Posted April 19, 2012 here's the zerohedge, for fun: http://www.zerohedge.com/news/bank-america-earnings-cutting-through-noise Link to comment Share on other sites More sharing options...
bmichaud Posted April 19, 2012 Share Posted April 19, 2012 I adjusted it myself. I left in equity investment income and gains on sales of debt securities since those are lumpy quarter-to-quarter (i.e. they are not one-time gains such as the CCB sale was last year). LAS noninterest expense was $3B, found on page 13 - I assume $300MM is "core LAS" expense, as guided by the Company last year, so I add back $2.7B to come up with "adjusted PTPP". Preferred dividends of $325MM I adjusted using a 35% tax rate to come up with $500MM pre-tax (since they are not tax deductible). Lastly, I added back R&W provision of $282MM. Link to comment Share on other sites More sharing options...
nkp007 Posted April 19, 2012 Share Posted April 19, 2012 Earnings transcript if anyone is interested.... Adjusted PTPP earnings look great! Reported FTE PTPP was $3.3B versus $9.4B after adjusting for debt/trps repurchase gains, FVA and DVA, R&W provision, non-core LAS NIE and preferred dividends. I made some conservative, broad adjustments and came to ~$7 billion in PTPP. Annualized ($28 billion) and on a share count of 11 billion, that's around $2.55 per share of PTPP. What this tells me is that BAC has significant cash coming in through the door to handle liabilities. I also think we're still near a trough margins type of situation for big U.S. banks. As BAC settles its cloudy litigation and the U.S. economy strengthens, the crowd will start to love it. I've been buying the warrants for months, from as far back as when the stock was trading ~$5 to buying a few yesterday. As far as valuation, BAC is definitely worth more than tangible book value. In 2019, I think we'll be smiling back on these times. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 19, 2012 Share Posted April 19, 2012 here's the zerohedge, for fun: http://www.zerohedge.com/news/bank-america-earnings-cutting-through-noise Did not they hear that the new home equity NPAs are performing? And their issue with the reps and warranties reserve ... OK I will stop there. Link to comment Share on other sites More sharing options...
racemize Posted April 19, 2012 Share Posted April 19, 2012 here's the zerohedge, for fun: http://www.zerohedge.com/news/bank-america-earnings-cutting-through-noise Did not they hear that the new home equity NPAs are performing? And their issue with the reps and warranties reserve ... OK I will stop there. yeah for a group that makes fun of the short term nature of the reports, they sure are ignoring the long term trends... Link to comment Share on other sites More sharing options...
CONeal Posted April 20, 2012 Share Posted April 20, 2012 Wondering if WB will expose this little wonder company during his annual meeting. Link to comment Share on other sites More sharing options...
Cardboard Posted April 20, 2012 Share Posted April 20, 2012 http://blogs.wsj.com/deals/2012/04/20/mike-mayo-cuts-bofa-to-sell/?mod=yahoo_hs Another a-hole, just like Meredith Whitney. At least Paulson was able to see a rebound after the depth. Can't believe that the Street is still so influenced by these 2 with BAC down over 2% today. Cardboard Link to comment Share on other sites More sharing options...
goldfinger Posted April 20, 2012 Share Posted April 20, 2012 http://blogs.wsj.com/deals/2012/04/20/mike-mayo-cuts-bofa-to-sell/?mod=yahoo_hs Another a-hole, just like Meredith Whitney. At least Paulson was able to see a rebound after the depth. Can't believe that the Street is still so influenced by these 2 with BAC down over 2% today. Cardboard Agreed. What an idiot! But I am wondering if the downside today is not related to the article 78 hearing (MBIA is also down). That's how the market deals with "uncertainty"! :-X Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 20, 2012 Share Posted April 20, 2012 Sounds like this Brian Charles, an analyst at RW Pressprich & Co, has actually run the numbers and is following the legal process. Has anyone heard of him before? http://www.bloomberg.com/video/90938665/ Link to comment Share on other sites More sharing options...
bmichaud Posted April 20, 2012 Share Posted April 20, 2012 Never heard of him, but his process for analyzing remaining R&W exposure is nearly identical to mine, though I come up with about $25B of potential exposure (I think he said his was $15B). If BAC can continue to generate the "core PTPP" it did this last quarter and phase out non-core LAS expenses, it should pretty easily be able to handle $25B. Link to comment Share on other sites More sharing options...
nkp007 Posted April 20, 2012 Share Posted April 20, 2012 Never heard of him, but his process for analyzing remaining R&W exposure is nearly identical to mine, though I come up with about $25B of potential exposure (I think he said his was $15B). If BAC can continue to generate the "core PTPP" it did this last quarter and phase out non-core LAS expenses, it should pretty easily be able to handle $25B. When you say exposure, do you mean R&W expenses beyond what have already been reserved for? Link to comment Share on other sites More sharing options...
bmichaud Posted April 20, 2012 Share Posted April 20, 2012 Never heard of him, but his process for analyzing remaining R&W exposure is nearly identical to mine, though I come up with about $25B of potential exposure (I think he said his was $15B). If BAC can continue to generate the "core PTPP" it did this last quarter and phase out non-core LAS expenses, it should pretty easily be able to handle $25B. When you say exposure, do you mean R&W expenses beyond what have already been reserved for? Correct. "Possible" exposure if you will - BAC estimates possible exposure is around $5B, whereas I think it's more like $25B. Link to comment Share on other sites More sharing options...
Kraven Posted April 20, 2012 Share Posted April 20, 2012 Never heard of him, but his process for analyzing remaining R&W exposure is nearly identical to mine, though I come up with about $25B of potential exposure (I think he said his was $15B). If BAC can continue to generate the "core PTPP" it did this last quarter and phase out non-core LAS expenses, it should pretty easily be able to handle $25B. When you say exposure, do you mean R&W expenses beyond what have already been reserved for? Correct. "Possible" exposure if you will - BAC estimates possible exposure is around $5B, whereas I think it's more like $25B. I assume you are familiar with the saying that it's better to be approximately right, than precisely wrong? You are absolutely kidding yourself if you think you can estimate this better than the bank itself. That's not to say that their estimate is God's gift to estimation, but at least they have more facts than you and it's not like they really have a huge incentive to under estimate it. Yes, it increases current earnings, but better to do the big bath now. I could give you the documents for a single MBS transaction including all of the appendices that list out the properties, etc. Do you really believe it is possible to get a great estimate on thousands of properties and dozens of different reps? If so, I would be interested in the methodology. I am quite familiar with the underlying documentation and I wouldn't undertake to estimate even a single deal, not to mention the hundreds of deals done between Countrywide, BAC itself, etc. Link to comment Share on other sites More sharing options...
bmichaud Posted April 20, 2012 Share Posted April 20, 2012 I would be DELIGHTED if I am wildly off base with a $25B estimate. Just trying to come up with a worst case scenario to see if BAC can earn its way through without needing to dilute any further. All I did was take the remaining principle with 25 pmts or fewer payments and apply to-date repurchase and loss rates. More than likely they won't come anywhere near that amount, but it's just a worst case scenario for margin of safety purposes. Link to comment Share on other sites More sharing options...
Kraven Posted April 20, 2012 Share Posted April 20, 2012 I would be DELIGHTED if I am wildly off base with a $25B estimate. Just trying to come up with a worst case scenario to see if BAC can earn its way through without needing to dilute any further. All I did was take the remaining principle with 25 pmts or fewer payments and apply to-date repurchase and loss rates. More than likely they won't come anywhere near that amount, but it's just a worst case scenario for margin of safety purposes. I understand. Better to be safe than sorry. My point is simply that it's almost impossible to even guess this. As you can see just from this thread, from the bank's estimate to the analyst to yours, we're talking differences of, what, $20 bil? The number is actually not capable of being calculated. It will depend on things that happen in real time. When the judgment comes down or the settlement is reached, whatever, that's when we'll know. I am not sure a worst case scenario can be calculated with any precision either. It might make one feel better, but it's not that accurate in my opinion. What it comes down to is that the matter seems to be under control and that looking at what has occurred so far we can (hopefully) be comfortable that the company has it well in hand. But there is always the possibility of an armageddon scenario, although that seems highly unlikely at this point, but difficult to impossible to quantify. Link to comment Share on other sites More sharing options...
bmichaud Posted April 20, 2012 Share Posted April 20, 2012 I hear what you're saying, I guess I'm just not following your point. Isn't that exactly what investing is all about, trying to handicap the unknown to the best of our ability? So if the loss ends up being $50B and I get diluted, then BAC ends up being fairly valued at $12 versus $16 (hypothetical numbers of course) but by buying with a margin of safety at $8 I still realize a return if it ends up at $12? Perhaps I'm too simple minded with how I'm looking at it... Link to comment Share on other sites More sharing options...
Kraven Posted April 20, 2012 Share Posted April 20, 2012 Yes, of course. My point is that you are trying to quantify something that can't be quantified. Whether the number is $5 bil, $25 bil or $50 bil, it would seem as if there is a MOS here. But I don't think you can say well I'll go with $25 bil and state it as a matter of certainty. It isn't knowable. I also don't think it provides comfort to view that number as providing you a measure of safety. I don't think you are being simple minded at all. I think you are trying too hard in fact and making it more complicated than it is. Think back to the Graham example of not needing to know exactly what a man weighs to know he is fat (or the very un PC example of not needing to know a woman's age to know that she is able to vote). It seems clear that we know the man is heavier than he should be here. We don't need to guess the weight. Link to comment Share on other sites More sharing options...
alertmeipp Posted April 20, 2012 Share Posted April 20, 2012 Love the market, bought some of BAC at ~mid 8 today. When are they going to replay the insolvent news? Link to comment Share on other sites More sharing options...
nkp007 Posted April 20, 2012 Share Posted April 20, 2012 Yes, of course. My point is that you are trying to quantify something that can't be quantified. Whether the number is $5 bil, $25 bil or $50 bil, it would seem as if there is a MOS here. But I don't think you can say well I'll go with $25 bil and state it as a matter of certainty. It isn't knowable. I also don't think it provides comfort to view that number as providing you a measure of safety. I don't think you are being simple minded at all. I think you are trying too hard in fact and making it more complicated than it is. Think back to the Graham example of not needing to know exactly what a man weighs to know he is fat (or the very un PC example of not needing to know a woman's age to know that she is able to vote). It seems clear that we know the man is heavier than he should be here. We don't need to guess the weight. I think bmichaud is acting similar to Graham by stating simply that he thinks a conservative estimate of exposure is $25B. He's judging it based on a worst case scenario that's 5X what BAC estimates. In other words, even if BAC is wrong by a significant amount, it still should be OK given the PTPP cash coming in. Even if his number was $15B or $35B, the same applies. BAC is cheap. How cheap? I don't know, but it is fat. Link to comment Share on other sites More sharing options...
bmichaud Posted April 20, 2012 Share Posted April 20, 2012 Yes, of course. My point is that you are trying to quantify something that can't be quantified. Whether the number is $5 bil, $25 bil or $50 bil, it would seem as if there is a MOS here. But I don't think you can say well I'll go with $25 bil and state it as a matter of certainty. It isn't knowable. I also don't think it provides comfort to view that number as providing you a measure of safety. I don't think you are being simple minded at all. I think you are trying too hard in fact and making it more complicated than it is. Think back to the Graham example of not needing to know exactly what a man weighs to know he is fat (or the very un PC example of not needing to know a woman's age to know that she is able to vote). It seems clear that we know the man is heavier than he should be here. We don't need to guess the weight. I hear what you're saying - though I think we may disagree on how much this BAC individual weighs. WFC at $22 with hardly any R&W exposure is/was an obese investment - BAC with significantly more R&W exposure and not nearly the juicy returns WFC has is not nearly as fat at almost any price given the risk of impairment. We could debate ad nauseum. But your point is well taken, and I hear what your saying. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 20, 2012 Share Posted April 20, 2012 Obese. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 20, 2012 Share Posted April 20, 2012 Hey, this Brian Charles sounds like a smart guy. He does not even sound like an analyst. http://search1.bloomberg.com/search/?content_type=video&page=1&template=tv&q=brian%20charles His PTPP seems a little high. For that a lot of things would have to go right, but not that much. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted April 20, 2012 Share Posted April 20, 2012 Never heard of him, but his process for analyzing remaining R&W exposure is nearly identical to mine, though I come up with about $25B of potential exposure (I think he said his was $15B). If BAC can continue to generate the "core PTPP" it did this last quarter and phase out non-core LAS expenses, it should pretty easily be able to handle $25B. When you say exposure, do you mean R&W expenses beyond what have already been reserved for? Correct. "Possible" exposure if you will - BAC estimates possible exposure is around $5B, whereas I think it's more like $25B. BAC estimates "non-GSE" exposure at possible $5b above accruals. What about the GSE exposure? It's not included in that figure and the bank has not estimated it for us. GSE claims grew by nearly $2b in Q1 2012. Link to comment Share on other sites More sharing options...
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