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BAC-WT - Bank of America Warrants


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Dimon is beautiful with the 100% going to buybacks of far below intrinsic value stock.  Seems like a textbook "Outsider" CEO adding value with a capital allocation decision.  I frankly loathe myself a little for owning BAC and not JPM.  ;D

 

Yeah, but BAC is getting a better price for buybacks...

 

Disclosure: I own some of both + through BRK

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Dimon is beautiful with the 100% going to buybacks of far below intrinsic value stock.  Seems like a textbook "Outsider" CEO adding value with a capital allocation decision.  I frankly loathe myself a little for owning BAC and not JPM.  ;D

 

The press release says that JPM is continuing its 48 cents per share quarterly dividend. That is an annual payout of about $7 billion. So if everything goes as planned, shareholders get a total capital return of $17.5 billion or so over the next year. As a shareholder, I'm pretty happy.

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I would be happy too.  Congrats.  Gold star to Moynihan and Co too.  Much better than recent years for sure.  We are all getting paid like 6 - 8% in "shareholder yield" to wait.  Too bad we BAC holders are on the lower end of that spectrum (looks like the lowest of all the big banks to me).  Buybacks would of course be even more impactful given the current valuation.

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Forgive the double post, but since this is the thread that sparked the whole discussion, I thought it made sense to post my CoL essay here.  Also, there's a long discussion of BAC-A warrants and their CoL behavior since inception that I think is worth looking at for BAC investors.

https://www.dropbox.com/s/u3epy2qiepi9odr/2016-10-11%20Cost%20of%20Leverage.pdf?dl=0

 

The CoL on the warrants are now at one of their lowest levels in a while, so they aren't too bad.  However, in the past, common performance has pretty much always beaten the warrants due to CoL fluctuations. 

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comments on 3Q earnings?

 

 

 

Bank of America Reports Q3-16 Net Income of $5.0 Billion, EPS of $0.41

Revenue Increased 3% to $21.6 billion; Noninterest Expense Declined 3% to $13.5 billion

 

• Revenue, net of interest expense, increased 3% to $21.6 billion from $21.0 billion

            – Net interest income (NII) increased 3% to $10.2 billion from $9.9 billion (GAAP basis)

              – Noninterest income increased 3% to $11.4 billion from $11.1 billion

• Provision for credit losses of $850 million, compared to $806 million; net charge-offs declined to $888 million from $932 million

• Noninterest expense declined 3%, or $458 million, to $13.5 billion

• Pretax earnings up 17% to $7.3 billion

• Net income increased 7% to $5.0 billion and EPS increased 8% to $0.41, compared to $4.6 billion and $0.38, respectively

 

• Book value per share increased 8% to $24.19; tangible book value per share increased 11% to $17.14

• Repurchased $1.4 billion in common stock and paid $0.8 billion in common stock dividends

 

 

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Great quarter and I love the share repurchases below TBV - huge value creation!  Can BAC reach out to the regulators and request an increase?

 

comment on 3Q earnings?

 

 

 

Bank of America Reports Q3-16 Net Income of $5.0 Billion, EPS of $0.41

Revenue Increased 3% to $21.6 billion; Noninterest Expense Declined 3% to $13.5 billion

 

• Revenue, net of interest expense, increased 3% to $21.6 billion from $21.0 billion

            – Net interest income (NII) increased 3% to $10.2 billion from $9.9 billion (GAAP basis)(A)

              – Noninterest income increased 3% to $11.4 billion from $11.1 billion

• Provision for credit losses of $850 million, compared to $806 million; net charge-offs declined to $888 million from $932 million

• Noninterest expense declined 3%, or $458 million, to $13.5 billion

• Pretax earnings up 17% to $7.3 billion

• Net income increased 7% to $5.0 billion and EPS increased 8% to $0.41, compared to $4.6 billion and $0.38, respectively

 

• Book value per share increased 8% to $24.19; tangible book value per share(D) increased 11% to $17.14

• Repurchased $1.4 billion in common stock and paid $0.8 billion in common stock dividends

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BAC's is ~4%, not significant like AIG but still meaningful. 

 

Glad they are out buying, but 1.5 billion is only 1% of the company.  And I don't think they can raise until next year and/or next stress test results (maybe they can do what them and JPM did at Q1 last year?).

 

Hmm,  Citi's buyback below TBV is like 6% per annum?

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  • 4 weeks later...

Starting to approach TBV / intrinsic value. What are everyone's thoughts?

 

Move on to something cheaper? Worth ~$18-20 a share w/ ROTE at ~10-12% and multiple of ~10-12. It could be worth more, but then you need a view on interest rates, interest rates, growth, etc that are more favorable than a return to normalcy.

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I still have a very full position... maybe I should trim some.

 

I trimmed a lot today.  I still have some warrants, but I have closed all of my options out.  It's been a tough 12 months or so holding the calls.  I'm glad I didn't panic and sell earlier though.  I'm done with options for a while I think.  Too much stress and I don't like the time constraints.

 

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I still have a very full position... maybe I should trim some.

 

I trimmed a lot today.  I still have some warrants, but I have closed all of my options out.  It's been a tough 12 months or so holding the calls.  I'm glad I didn't panic and sell earlier though.  I'm done with options for a while I think.  Too much stress and I don't like the time constraints.

 

My compliance department denied it. I guess I will sit tight!

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Lots to like about financials right now:

1.) US 10 year bond is up 22 basis points and is now over 2%; it was 1.4% a few months ago

2.) good bye Elizabeth Warren

3.) financial regulators appointed by Trump will likely be much more supportive of the big banks

4.) likelihood of new anti big bank laws getting passed is very low

5.) likelihood of Dodd Frank getting watered down is medium to high (Trump said he wants to repeal it)

 

The big banks are over capitalized. They are also very profitable. They are returning around 8% to shareholders (dividends plus stock buybacks). The political tone in Washington will likely shift in the coming months and become more pro bank (from rabid anti bank). Weave it all together and I see earnings growth, much lower share count and multiple expansion. This usually results in much higher stock prices. And if the fed raises in Dec this will be icing on the cake for bank investors,

 

PS: and, yes, the past 12 months have been very hard for investors in bank stocks (felt like I was living the movie Groundhog Day).

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