BAC-WT - Bank of America Warrants

[ERICOPOLY]

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

[tylerdurden]

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

Earlier you distribute capital back to investors, earlier your equity base shrinks and your return on your equity also goes higher though, right?

[ourkid8]

Eric was referring to improving these metrics operationally. It has been an extremely slow process in trying to close the gap between the leaders - Wells Fargo, USB etc...

 

Tks,

S

 

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

Earlier you distribute capital back to investors, earlier your equity base shrinks and your return on your equity also goes higher though, right?

[benchmark]

I am very disappointed with the leadership here -- maybe it's time to change horses.

Eric was referring to improving these metrics operationally. It has been an extremely slow process in trying to close the gap between the leaders - Wells Fargo, USB etc...

 

Tks,

S

 

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

Earlier you distribute capital back to investors, earlier your equity base shrinks and your return on your equity also goes higher though, right?

[finetrader]

I am disapointed with these stress test results.

 

BAC would have to show that they can increase earnings for the stock to go higher.

 

As many people has said, it is too slow of a process.

 

Too slow for me anyway as I have 55% of my portfolio invested in BAC. Buffett can wait becauce BAC may be a 5% portfolio at best.

 

As such, I have started to sell OTM 1 month call on BAC as a way to increase yield with this position. Too bad if I get exerciced on those calls but I need to make some money with this position.

[tylerdurden]

Eric was referring to improving these metrics operationally. It has been an extremely slow process in trying to close the gap between the leaders - Wells Fargo, USB etc...

 

Tks,

S

 

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

Earlier you distribute capital back to investors, earlier your equity base shrinks and your return on your equity also goes higher though, right?

 

Sure. That makes sense. Especially for the long run you'd hope BAC does a better job in terms of operational profitability. Having said that though increase in profitability (numerator) and decrease in equity base (denominator) gives you the same outcome right? (Increase in ROE) So I'd think any improvement in terms of the capital return should also help with the return metrics...

[kevin4u2]

According to the 10k they bought back $1.5 billion net of issuance, and common dividends were $1.3 billion for 2014 

 

2015 capital return is dividends of ~$2.1 billion, and buyback of $4 billion. 

 

[....]

 

How do you figure C returned $1.3B in 2014?

 

They had a buyback just under $1.2bn and their little dividend amounts to $100m or so - this isn't for 2014 FY but rather for the 2014 CCAR cycle, i.e. 2Q14-1Q15, but the 2014 figures are pretty much the same deal.

[morningstar]

According to the 10k they bought back $1.5 billion net of issuance, and common dividends were $1.3 billion for 2014 

 

2015 capital return is dividends of ~$2.1 billion, and buyback of $4 billion. 

 

[....]

 

How do you figure C returned $1.3B in 2014?

 

They had a buyback just under $1.2bn and their little dividend amounts to $100m or so - this isn't for 2014 FY but rather for the 2014 CCAR cycle, i.e. 2Q14-1Q15, but the 2014 figures are pretty much the same deal.

 

I believe you're talking about BAC there.

 

In the case of BAC the difference between the CCAR fiscal periods and the fiscal year really show up a lot in looking at the capital actions - all those 2014 buybacks for BAC ($1.675bn gross) were completed in the first half of 2014 under the 2013 cycle. So the 2014 cycle approval for BAC reflects just the dividend and no buybacks, and the 2015 cycle is the same dividend plus $3.2bn in annualized repurchases ($4bn over 5 quarters).

[nikhil25]

Couldn't agree more. BAC is about 45% of my portfolio and to some extent, I was counting on this year's capital allocation plan to serve as a catalyst but I'm left disappointed... yet again!

 

I am disapointed with these stress test results.

 

BAC would have to show that they can increase earnings for the stock to go higher.

 

As many people has said, it is too slow of a process.

 

Too slow for me anyway as I have 55% of my portfolio invested in BAC. Buffett can wait becauce BAC may be a 5% portfolio at best.

[Investmentacct]

Hello Mephistopheles/tylerdurden;

 

Can you please site the source document for this tax filing requirement for filing federal taxes; that will be really helpful.

As this dividend does not get reflected on 1099-DIV or OID statement; then where can we locate the information for it.

 

Thanks in advance,

Investmentacct

 

 

 

Hi Folks - I have a tax related question to the warrant holders. Any of you paying taxes this year on the dividend adjustments on the exercise price / warrant share numbers from 2014? If so, how did you come up with the amount? My 1099-DIV does not include these adjustments. I think these dividend adjustments are taxable but not sure how the warrant holders are supposed to pay these taxes. I do my own taxes so unfortunately have no tax advisor therefore I wanted to ask the question here; perhaps someone knows the right approach...

 

I think you just pay on everything over $.01/quarter, so $.04/quarter in this case. Make sure to add this amount to your cost basis to avoid double taxation when you sell.

[tylerdurden]

Hello Mephistopheles/tylerdurden;

 

Can you please site the source document for this tax filing requirement for filing federal taxes; that will be really helpful.

As this dividend does not get reflected on 1099-DIV or OID statement; then where can we locate the information for it.

 

Thanks in advance,

Investmentacct

 

 

 

Hi Folks - I have a tax related question to the warrant holders. Any of you paying taxes this year on the dividend adjustments on the exercise price / warrant share numbers from 2014? If so, how did you come up with the amount? My 1099-DIV does not include these adjustments. I think these dividend adjustments are taxable but not sure how the warrant holders are supposed to pay these taxes. I do my own taxes so unfortunately have no tax advisor therefore I wanted to ask the question here; perhaps someone knows the right approach...

 

I think you just pay on everything over $.01/quarter, so $.04/quarter in this case. Make sure to add this amount to your cost basis to avoid double taxation when you sell.

 

Hello - Please see the attached BAC Statement regarding the latest adjustment. I copied the paragraph about the tax implications from this statement at below. Although there is not much detail, they give high level perspective about the impact of adjustment on taxes. There are some tax info in the prospectus, which can be found on BAC Investor website as well. I think there were folks on this board who received some external advice about this topic; perhaps they can also shed some light or provide some updates...

 

"For U.S. federal income tax purposes, any increase in the proportionate interest of a holder of A Warrants in BAC’s earnings and profits attributable to any adjustment, or amount carried forward, in the number of shares of BAC’s common stock underlying the A Warrants (the Warrant Share Number) and/or the Exercise Price of the A Warrants will be treated as a distribution of property which is a dividend, return of capital or capital gain. For a non-U.S. holder of A Warrants, such distribution may be subject to U.S. federal withholding tax. Each holder of A Warrants should consult their own tax advisor concerning the U.S. federal income tax consequences of such a distribution in light of their particular circumstances, as well as any consequences arising under laws of any other applicable taxing jurisdiction."

BAC_Statement_Regarding_Adjustment_03_04_2015.pdf

[redskin]

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

I'm concerned the stock price will increase before they will be able to reduce the share count significantly.

[boilermaker75]

http://finance.yahoo.com/news/sec-forces-bank-america-hold-144743276.html

[karthikpm]

http://finance.yahoo.com/news/sec-forces-bank-america-hold-144743276.html

 

If there is no support from the board, can the SEC mandate a split?

[ERICOPOLY]

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

I'm concerned the stock price will increase before they will be able to reduce the share count significantly.

 

That's probably just the reality of things.  The stock is depressed during the rebuilding phase, and then the price jumps up when the coast is clear and earnings are strong.

 

Similarly, the Fed holds them back and makes them retain capital during the rebuilding phase, and then let's them buy shares back in large quantity once their earnings power is restored.

 

In other words, you can expect the stock price to be high when their buybacks occur in force.

 

 

[benchmark]

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

I'm concerned the stock price will increase before they will be able to reduce the share count significantly.

 

That's probably just the reality of things.  The stock is depressed during the rebuilding phase, and then the price jumps up when the coast is clear and earnings are strong.

 

Similarly, the Fed holds them back and makes them retain capital during the rebuilding phase, and then let's them buy shares back in large quantity once their earnings power is restored.

 

In other words, you can expect the stock price to be high when their buybacks occur in force.

With merely $4billion dollars for buy back, they should buy back as much as they can at the current price.

[ourkid8]

As we have seen the in past, management will spread out the repurchase over the next 5 quarters instead of buying the stock when its on sale.  I am still rather annoyed at the amount requested as the only benefit of the $4B repurchase program is to offset stock option dilution.

 

Tks,

S

 

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

I'm concerned the stock price will increase before they will be able to reduce the share count significantly.

 

That's probably just the reality of things.  The stock is depressed during the rebuilding phase, and then the price jumps up when the coast is clear and earnings are strong.

 

Similarly, the Fed holds them back and makes them retain capital during the rebuilding phase, and then let's them buy shares back in large quantity once their earnings power is restored.

 

In other words, you can expect the stock price to be high when their buybacks occur in force.

With merely $4billion dollars for buy back, they should buy back as much as they can at the current price.

[boilermaker75]

This doesn't really matter.  Retaining $1 of earnings for an extra year only bears time value of money cost.

 

The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. 

 

Until they deliver on that, I don't expect much.

 

I'm concerned the stock price will increase before they will be able to reduce the share count significantly.

 

That's probably just the reality of things.  The stock is depressed during the rebuilding phase, and then the price jumps up when the coast is clear and earnings are strong.

 

Similarly, the Fed holds them back and makes them retain capital during the rebuilding phase, and then let's them buy shares back in large quantity once their earnings power is restored.

 

In other words, you can expect the stock price to be high when their buybacks occur in force.

With merely $4billion dollars for buy back, they should buy back as much as they can at the current price.

 

They should. Can they do it by writing puts and at least getting a little more bang out of the $4 billion?

 

As Eric points out, this is just the reality that they will not be allowed to buy back till the price is not so undervalued. So while the price is undervalued, I keep writing puts in the 15.5 to 17 strike range and then turning around and writing covered calls if I am put to. I would love for BAC's price staying in this range so I can keep on doing this for a long time!

 

Note I already have a long-term hold position with BAC and this option activity is with shares that would be beyond the position size I want to hold long term. Hence why I turn around and write calls if put to.

[gokou3]

http://finance.yahoo.com/news/sec-forces-bank-america-hold-144743276.html

 

If there is no support from the board, can the SEC mandate a split?

 

A spin-off of Merrill Lynch would be a good catalyst, isn't it?  ML itself is worth what, $50-100B?  Vs. $164B for BAC today.

[karthikpm]

http://finance.yahoo.com/news/sec-forces-bank-america-hold-144743276.html

 

If there is no support from the board, can the SEC mandate a split?

 

A spin-off of Merrill Lynch would be a good catalyst, isn't it?  ML itself is worth what, $50-100B?  Vs. $164B for BAC today.

 

Agree it would be a good catalyst..  But does not seem like there is much will to do that. 

[wescobrk]

I think the expectation is to earn 1.40 this year and 1.65 next year or about 10% on tbv this year and about the same next year.

Assuming the cost of capital is 10% for BAC, it probably shouldn't trade much higher than $16.50.

Makes me wonder why I continue to hold it to be honest.

[madmarv]

After the meltdown of 2008 would the regulators ever let ML stand on its own?  A tracking stock might be the closest they could get to a spinoff.

[benchmark]

I think the expectation is to earn 1.40 this year and 1.65 next year or about 10% on tbv this year and about the same next year.

Assuming the cost of capital is 10% for BAC, it probably shouldn't trade much higher than $16.50.

Makes me wonder why I continue to hold it to be honest.

If that's the earning power they have for this and next year, this is essentially dead money. However, they should be able to earn more than this. They should be able to get around $1.5 and $1.8 this and next year, assuming the rate rise this June, etc. So they should be traded around $17-$18.5 range by year end.

[wescobrk]

I think the expectation is to earn 1.40 this year and 1.65 next year or about 10% on tbv this year and about the same next year.

Assuming the cost of capital is 10% for BAC, it probably shouldn't trade much higher than $16.50.

Makes me wonder why I continue to hold it to be honest.

If that's the earning power they have for this and next year, this is essentially dead money. However, they should be able to earn more than this. They should be able to get around $1.5 and $1.8 this and next year, assuming the rate rise this June, etc. So they should be traded around $17-$18.5 range by year end.

I hope you're right. I got that from yahoo finance which is the average about 30 analysts.

Fed funds future dropped dramatically yesterday. The Fed in Dec thought fed funds futures would be at 1.3% at end of 2015 now they think it's half that at .62 and future years dropped by half as well.

How do you get to them earning 10 to 40 cents higher than the average of 30 analysts especially with even tighter NIM after a more dovish Fed?

[wescobrk]

Is it just me or is the seeking alpha articles on Bank of America in fantasy land? These are very poorly written articles. I guess they take anyone.

I see people writing up that it is worth $21 but they have no supporting evidence besides that is book value and they believe it should trade at book.

 

There is even one written this morning that it is currently at tangible book value. Huh? TBV is in the mid 14's not at $15.70.

I need to delete my seeking alpha account.