BAC-WT - Bank of America Warrants

[snowball82]

Very disappointing ROE at 6 %...

 

And each top 7 executive earn more than $ 9 M last year. $ 16 M for the CEO, $ 308 k / week.

 

Facts speak.

[rkbabang]

Living will rejected as "not credible"

 

http://www.federalreserve.gov/newsevents/press/bcreg/bank-of-america-letter-20160413.pdf

 

[nodnub]

Living will rejected as "not credible"

 

http://www.federalreserve.gov/newsevents/press/bcreg/bank-of-america-letter-20160413.pdf

 

Also JPM, WFC, BoNY Mellon, and State St.

http://www.bloomberg.com/news/articles/2016-04-13/five-big-banks-living-wills-rejected-by-u-s-banking-agencies

 

--

from the article: 

The worst-case scenario for a bank that continually fails to present credible plans is that regulators eventually could get authority to break them up, according to the law. Those are uncharted waters, because this marks the first time regulators have taken the initial step to find fault.

[nsa122]

I am just curious to get the thoughts/perspective of some of the long-term holders. Personally I bought in Aug 2011 at just under $7 and ended up selling in the mid $13s in Nov. 2013 or so, when I got frustrated (perhaps prematurely) at lack of operational progress.  I've continued to follow it, and while BAC hasn't really done much, I can't claim that I've had any smashing success yet with the stocks I bought after I sold BAC, especially considering the tax hit. I continue to watch and wonder whether I should have held on to BAC or not.  Time will tell.  Anyway, are long-term holders satisfied with management and performance? I know some clearly expected more progress in terms of earnings etc, but I am aware that there are significant headwinds. Will those improve or here to stay? How much risk do people see in terms of new technology ultimately disrupting BAC's business (or conversely making it more profitable)? It seems like they have cut branches and costs dramatically, but there is still a risk that some brilliant new platform comes along and completely upsets their apple cart, along the lines of this SoFi profiled in WSJ yesterday.  How many here bought years ago and are still holding on, out of curiosity? 

[bennycx]

I have made significant amounts by investing 1/3 of my portfolio in BAC under $5 in 2011, then sold at $17 in 2014 which I then switched to USB, and now I am back in under $12 recently for 25% of my portfolio. I can say that I am quite disappointed with the bank's operational performance and do not plan to hold it for the long term. I always wonder if I got lucky on the trades but I have a relative ballpark valuation in my head amongst the big US banks that would make me switch from one bank to another. However for the long term, I would only consider banks like WFC (which I am also holding currently) and USB.

[Viking]

The big US banks have been a trade for me not a long term hold. Similar to Benny I have shifted my position between banks as relative valuations get out of whack. Earlier this year when BAC got especially hammered I flipped my entire position from JPM to BAC. More recently I have moved from BAC to C (as I expect C to do better than BAC when CCAR is announced in June); I still prefer BAC or C over JPM on valuation alone. As a long term holding I would stick with WFC or JPM.

 

When you look at how the stock price has performed at the big banks over the past 3 or so years you would have to give all management teams a fail. However, things are looking up for the big banks:

1.) litigation is over (I am talking about the big issues)

2.) bad businesses/loan books from 2008 have almost completely run off

3.) most are flush with capital needing minimal builds moving forward to get to regulatory levels

Government regulation and interest rates remain two wild cards. I think the government regulation issue will get finalized over the next year and this should result in the banks making decisions to improve returns. Interest rates will likely stay low.

 

I really think the key to the share prices in the near term is what the government approves in June for capital return (CCAR). The big banks cannot keep adding to capital year after year like they currently are.

[fareastwarriors]

We have hope.

 

http://www.wsj.com/articles/the-latest-activist-investor-at-bank-of-america-a-ninth-grader-1461866806

The Latest Activist Investor at Bank of America:

A Ninth-Grader Natalie Clarke, 15, owns 5,000 shares in Bank of America given to her when she was a baby

[Viking]

Here is a very good analysis by IP Banking on Seeking Alpha:

Bank Of America: Trapped Capital Is The Real Problem With The Stock $BAC

http://www.seekingalpha.com/article/3970269

[vinod1]

Here is a very good analysis by IP Banking on Seeking Alpha:

Bank Of America: Trapped Capital Is The Real Problem With The Stock $BAC

http://www.seekingalpha.com/article/3970269

 

I do not think "trapped capital" is the real problem. Even if "LAS" is spun off, losses and all with $24 billion in equity, TBV would be $14 and ROTCE would be around 10% - 10.5%. I doubt that would get the stock to jump to $20.

 

Problem is PTPP income is only around $28 billion assuming LAS expenses drop to $2 billion per plan. Compare this to what they were expecting way back in 2011 of around $45 to $50 billion PTPP income normalized and $35-$40 billion in pre-tax income.

 

During one of the best period for making loans from 2009 to 2013, they had to focus on legacy issues. Think of a P&C company retrenching during a hard market. That is exactly what BAC has done. Management could not have done really a whole lot different, just the hand they are dealt with.

 

Vinod

[Rasputin]

BAC WON!

 

Appeal from a judgment entered by the United States

District Court for the Southern District of New York (Rakoff, J.).

A jury found Defendants-Appellants liable under the Financial

Institutions Reform, Recovery, and Enforcement Act of 1989 for

mail or wire fraud affecting a federally insured financial

institution, arising from the sale of mortgages to governmentsponsored

entities. At the penalty stage, the District Court

imposed penalties exceeding $1.2 billion. On appeal,

Defendants-Appellants argue, inter alia, that the proof at trial is

insufficient under the mail and wire fraud statutes as a matter of

law. We agree and accordingly REVERSE the judgment of the

District Court.

________

 

http://www.ca2.uscourts.gov/decisions/isysquery/1f169165-6ebf-4c34-a3b3-3fd65542e930/2/doc/15-496_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/1f169165-6ebf-4c34-a3b3-3fd65542e930/2/hilite/

[CorpRaider]

Wow.  In linked WSJ article.  J. Powell basically says they are going to increase capital requirements with a view to making the big 8 consider breaking up.

 

http://www.wsj.com/articles/feds-tarullo-warns-banks-of-significant-increase-in-capital-in-future-stress-tests-1464870270

 

 

Bank of America from the miss west, NationsBank from miss east, Merrill Lynch, U.S. Trust; MBNA?

[TwoCitiesCapital]

Wow.  In linked WSJ article.  J. Powell basically says they are going to increase capital requirements with a view to making the big 8 consider breaking up.

 

http://www.wsj.com/articles/feds-tarullo-warns-banks-of-significant-increase-in-capital-in-future-stress-tests-1464870270

 

 

Bank of America from the miss west, NationsBank from miss east, Merrill Lynch, U.S. Trust; MBNA?

 

When I held BofA years ago (2009 & 2010ish), that was the main thrust of the thesis - that the Banks were significantly more valuable as a sum or parts than they were as these large companies.

 

I don't really understand the benefit to customers from having BofA own ML or the benefit to ML from being owned by BofA. Other than a somewhat diversified source of earnings, these amalgamations don't really make much sense to me. What it does mean is that the business of either is overshadowed by things happening to the other.

 

I imagine it'd be a net positive if the businesses were to be separated.

[nikhil25]

Agreed. Although, I wonder if they'll be able to unlock the full potential by breaking up now that they are (almost) being forced into it. Wish they had been more proactive about it --- in a way similar to GE.

[CorpRaider]

Yeah it has always seemed a little weird to me that banks you know spend billions on marketing to build a brand like NationsBank and then just wind it up.  Just a silly little exercise but would you rather have those brands or Norwest+ Wells Fargo + Wachovia + First Union (that might have negative brand equity) + ag Edwards(?) + definitely not this one Golden West.  Oh yeah I forgot Fleet Bank and First Boston in the BAC pantheon. 

 

At least we wouldn't have to hear "Bank of America Merrill Lynch" ever again as our the hours of our life drain like the sands from an hour glass. 

[rogermunibond]

It's the allure of cross-selling.  I get ML ads and offers all the time as a BAC checking customer.

 

That said, who besides WFC, has ever been successful at cross-selling.  And has anyone ever read a case study on how WFC does this vaunted cross-selling?  Are their customers idiots who never shop for financial products across various companies?

[KCLarkin]

Brokers have a large quantity of free deposits. Standalone they invest these funds in money market funds or short-term treasuries. Attached to banks, they can loan these funds at much better spreads.

 

All of the publicly traded brokers that I follow (with the exception of IBKR), either own banks or have relationships with banks (Schwab, Etrade, TD Ameritrade).

 

http://www.riabiz.com/a/5017706155737088/for-sub-500k-accounts-schwab-is-sweeping-ria-client-cash-into-its-bank-pumping-up-corporate-profits

[CorpRaider]

It's the allure of cross-selling.  I get ML ads and offers all the time as a BAC checking customer.

 

That said, who besides WFC, has ever been successful at cross-selling.  And has anyone ever read a case study on how WFC does this vaunted cross-selling?  Are their customers idiots who never shop for financial products across various companies?

 

I have also noticed lately that BAC figured out I have a credit card with them (had it since like 1998 MBNA) and they will give me like a 10% bump on rewards just for opening a checking account and even bigger increases if you have some assets to move.  So that makes sense.  Wells is definitely all over cross selling me stuff.

 

But I mean if the ROE is defacto materially higher if you're a super-regional versus a top 8....one would think that is something that will bring in guys like uncle Carl to get it done.  It's a no braineh.  Although BAC and WFC might be the two worst places to be if some stuff goes down since they will have WEB to coddle/protect management.

[ourkid8]

Uncle Carl is busy with AIG at the moment doing exactly what you said. 

 

It's the allure of cross-selling.  I get ML ads and offers all the time as a BAC checking customer.

 

That said, who besides WFC, has ever been successful at cross-selling.  And has anyone ever read a case study on how WFC does this vaunted cross-selling?  Are their customers idiots who never shop for financial products across various companies?

 

I have also noticed lately that BAC figured out I have a credit card with them (had it since like 1998 MBNA) and they will give me like a 10% bump on rewards just for opening a checking account and even bigger increases if you have some assets to move.  So that makes sense.  Wells is definitely all over cross selling me stuff.

 

But I mean if the ROE is defacto materially higher if you're a super-regional versus a top 8....one would think that is something that will bring in guys like uncle Carl to get it done.  It's a no braineh.  Although BAC and WFC might be the two worst places to be if some stuff goes down since they will have WEB to coddle/protect management.

[Gamecock-YT]

It's the allure of cross-selling.  I get ML ads and offers all the time as a BAC checking customer.

 

That said, who besides WFC, has ever been successful at cross-selling.  And has anyone ever read a case study on how WFC does this vaunted cross-selling?  Are their customers idiots who never shop for financial products across various companies?

 

I have also noticed lately that BAC figured out I have a credit card with them (had it since like 1998 MBNA) and they will give me like a 10% bump on rewards just for opening a checking account and even bigger increases if you have some assets to move.  So that makes sense.  Wells is definitely all over cross selling me stuff.

 

But I mean if the ROE is defacto materially higher if you're a super-regional versus a top 8....one would think that is something that will bring in guys like uncle Carl to get it done.  It's a no braineh.  Although BAC and WFC might be the two worst places to be if some stuff goes down since they will have WEB to coddle/protect management.

 

Have over $50k in assets with BOA/ML and you get free trades, 50% bonus on rewards, and a money market fund interest booster.

[CorpRaider]

Uncle Carl is busy with AIG at the moment doing exactly what you said. 

 

It's the allure of cross-selling.  I get ML ads and offers all the time as a BAC checking customer.

 

That said, who besides WFC, has ever been successful at cross-selling.  And has anyone ever read a case study on how WFC does this vaunted cross-selling?  Are their customers idiots who never shop for financial products across various companies?

 

I have also noticed lately that BAC figured out I have a credit card with them (had it since like 1998 MBNA) and they will give me like a 10% bump on rewards just for opening a checking account and even bigger increases if you have some assets to move.  So that makes sense.  Wells is definitely all over cross selling me stuff.

 

But I mean if the ROE is defacto materially higher if you're a super-regional versus a top 8....one would think that is something that will bring in guys like uncle Carl to get it done.  It's a no braineh.  Although BAC and WFC might be the two worst places to be if some stuff goes down since they will have WEB to coddle/protect management.

 

Good point.  Going to sniff around what Peltz saying over in BK.

[fareastwarriors]

It's the allure of cross-selling.  I get ML ads and offers all the time as a BAC checking customer.

 

That said, who besides WFC, has ever been successful at cross-selling.  And has anyone ever read a case study on how WFC does this vaunted cross-selling?  Are their customers idiots who never shop for financial products across various companies?

 

I have also noticed lately that BAC figured out I have a credit card with them (had it since like 1998 MBNA) and they will give me like a 10% bump on rewards just for opening a checking account and even bigger increases if you have some assets to move.  So that makes sense.  Wells is definitely all over cross selling me stuff.

 

But I mean if the ROE is defacto materially higher if you're a super-regional versus a top 8....one would think that is something that will bring in guys like uncle Carl to get it done.  It's a no braineh.  Although BAC and WFC might be the two worst places to be if some stuff goes down since they will have WEB to coddle/protect management.

 

Have over $50k in assets with BOA/ML and you get free trades, 50% bonus on rewards, and a money market fund interest booster.

 

+1

Their preferred rewards program is great for me as a customer.

[gary17]

big job data miss

looks like no interest rate hike for a very long while now lol 

[rogermunibond]

FT has a long article on WFC and their de-emphasis on their cross selling culture.

 

http://www.ft.com/intl/cms/s/0/8218f0f0-2be3-11e6-a18d-a96ab29e3c95.html

[BRK7]

The first of the 2016 stress test results comes June 23, only 2 weeks from now.  This is the test that shows capital levels under hypothetical scenario.

 

The second test result is June 29.  This one approves/rejects capital plans of the banks…in other words what levels of dividends/buybacks will be permitted.

 

https://www.federalreserve.gov/newsevents/press/bcreg/20160602a.htm

 

How are you guys feeling about BofA as we approach these important milestones?

 

[TheAiGuy]

Fine -- it's still cheap. Not as cheap as it was in February, though.