Profile:
Bank of America Corporation
100 North Tryon Street
Bank Of America Corporate Center
Charlotte, NC 28255
United States - Map
Phone: 704-386-5681
Fax: 704-386-6699
Web Site: http://www.bankofamerica.com
DETAILS
Index Membership: Dow Jones Composite
Dow Industrials
S&P 100
S&P 500
S&P 1500 Super Comp
Sector: Financial
Industry: Money Center Banks
Full Time Employees: 243,000
BUSINESS SUMMARY
Bank of America Corporation, a financial holding company, provides a range of banking and nonbanking financial services and products in the United States and internationally. Its Global Consumer and Small Business Banking segment offers savings accounts, money market savings accounts, certificate of deposits, individual retirement accounts, and checking accounts; U.S. Consumer and Business Card, unsecured lending, and international card; consumer real estate products, including mortgage products for home purchase and refinancing, reverse mortgage products, and home equity products; and insurance services. The company's Global Corporate and Investment Banking segment provides commercial and corporate bank loans, indirect consumer loans, real estate lending products, and leasing and asset-based lending products for banking clients, middle market commercial clients, multinational corporate clients, public and private developers, homebuilders, and commercial real estate firms; advisory services, financing, and related products for institutional investor clients in support of their investing and trading activities; debt and equity underwriting, merger-related advisory services, and risk management solutions; and treasury management, trade finance, foreign exchange, short-term credit facilities, and short-term investing options for correspondent banks, commercial real estate firms, and governments. The company's Global Wealth and Investment Management segment offers investment and brokerage services, estate management, financial planning services, fiduciary management, credit and banking expertise, and diversified asset management products to institutional clients and high-net-worth individuals. As of December 31, 2008, the company operated approximately 6,100 banking centers and 18,700 automated teller machines. Bank of America was founded in 1874 and is headquartered in Charlotte, North Carolina.
Big Bank
BIG BOUNCE WITH EARNING EXPECTATIONS...
Broke through short term resistance with big move on today,
up 35.27%. All banks and financial were up big time and may continue move up short term.
I wouldn't want to stay in the way of this one longer term. I will be a buyer on future weakness, (dip...pullback).
52wk Range: 2.53 - 40.65
Volume: 1,029,694,523
Avg Vol (3m): 428,166,000
Market Cap: 61.13B
P/E (ttm): 17.24
EPS (ttm): 0.55
Div & Yield: 0.04 (0.50%)
Technicals
Record Volume....... ;)
13-day EMA Cross Above 50-day MA
Close Above the 50-day MA
Most Actives
Gap Up
Percentage Gainer
Last Price Quote is:
29.20%above 13-day MA
32.08%above 50-day MA
RS Rating: 14
Fundamentals
Earnings Expected on Apr 20
Key Data:
Market Cap (M): $48,677.20
P/E Ratio: 12.19
PEG Ratio: 2.14706
Next Earnings: 04/20/2009
Last Analyst Rating: Perform
Bank of America Begins Mortgage Refinancing under U.S.Treasury Department's "Making Home Affordable" program...
CALABASAS, Calif., April 9, 2009 /PRNewswire via COMTEX/ -- Bank of America, which services one out of five mortgages in the United States, announced today that it has begun processing its first wave of mortgage refinance applications under the U.S. Treasury Department's "Making Home Affordable" program. The initiative provides new refinance opportunities to homeowners who previously could not qualify.
"Combined with historically low interest rates, this program has generated significant interest from borrowers seeking the benefit of lower mortgage payments," said Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services. "We are proud to be one of the first lenders to take loans from application to closing under the Treasury's plan, providing the opportunity for more Americans to save money on their monthly mortgage payments and supporting efforts to stabilize the nation's housing market."
The U.S. Treasury plan allows homeowners with loans owned by Fannie Mae or Freddie Mac, who are current with their mortgage payments and whose home value is no more than 105% of the current mortgage, balance the opportunity to refinance their loans. Complete eligibility guidelines can be found at http://www.makinghomeaffordable.gov/refinance_eligibility.html.
In its first wave, Bank of America will be able to serve the majority of eligible customers - homeowners whose mortgages are serviced by Bank of America or Countrywide and who do not have mortgage insurance on their current loans. Additional borrowers will be included as systems become operational.
Eligible homeowners may benefit from refinancing under the plan because of historically low interest rates coupled with guidelines designed to provide increased flexibility:
-- Expanded guidelines for high loan-to-value loans;
-- No mortgage insurance required on loans that did not previously carry
mortgage insurance; and
-- No required minimum credit score
"Potentially millions of Americans will benefit from the government's refinance and loan modification programs," said Desoer. "In just one month since announcing this program, nearly 200,000 homeowners have contacted us to determine their eligibility for refinancing. We're pleased to begin offering the program now to the majority of eligible customers and we look forward to expanding the offering to others in the coming weeks."
Bank of America is in the process of implementing the Treasury Department's "Home Affordable Modification" program for Bank of America and Countrywide customers. In the next two weeks, the company expects to begin offering trial modifications under the plan.
Bank of America has extended its voluntary moratorium on foreclosure of loans that may be eligible for the "Home Affordable Modification" program until April 30, 2009.
On April 27, 2009, the Bank of America and Countrywide mortgage brands will combine to become Bank of America Home Loans.
Bank of America and Countrywide customers can call the following phone numbers for more information on refinancing and loan modification opportunities:
Refinancing Loan Modifications
Bank of America Customers 888-256-7683 800-285-6000
Countrywide Customers 800-593-7798 800-669-6607
Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 59 million consumer and small business relationships with more than 6,100 retail banking offices, nearly 18,700 ATMs and award-winning online banking with nearly 29 million active users.
Following the acquisition of Merrill Lynch on January 1, 2009, Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries. Bank of America Corporation stock is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
www.bankofamerica.com
SOURCE Bank of America
http://www.bankofamerica.com
Copyright (C) 2009 PR Newswire. All rights reserved
Hopes for solid 1Q profits lead bank stocks higher
Bank stocks mostly higher as investors place bets ahead of earnings; Citi jumps 13 percent
Monday April 13, 2009, 2:44 pm EDT
Related:Bank of America Corporation, Citigroup, Inc., Fifth Third Bancorp
NEW YORK (AP) -- A number of bank stocks bucked the broader market Monday, plowing higher as investors placed bets on which banks might report better-than-expected earnings in the coming weeks.
The KBW Bank Index, which tracks 24 of the nation's largest banks, rose more than 6 percent. Citigroup Inc. and Bank of America Corp. shares led the gains, rising more than 17 percent and 14 percent, respectively.
Analysts said much of the buying was fueled by investors trying to determine which other banks could be the next Wells Fargo & Co., which wowed the market on Thursday when it said it expects to report a record quarterly profit for the first quarter.
The surprise announcement buoyed bank stocks and helped send the overall market sharply higher ahead of a long weekend. Markets were closed for Good Friday.
"People are looking for the biggest opportunity out there," said Keith Springer, president of Capital Financial Advisory Services, a Sacramento, Calif.-based wealth manager. "(Traders) are looking for the next shock. Who is going to shock again and surprise us with a great number?"
Analysts also attributed some of the buying to "short covering," or the buying of stocks to cover misplaced bets that banks would fall when they post results this week. Short covering has played a large role in the surge in bank stocks over the past few weeks.
Citigroup shares were also boosted by a report that the bank is considering selling its Japanese banking units. Japanese news service Kyodo News said Monday that Citi is considering a sale of Nikko Citigroup Ltd. along with brokerage Nikko Cordial Securities and Nikko Asset Management.
In January, Citigroup reorganized itself into two entities, Citicorp and Citi Holdings. The first is focused on traditional banking around the world, and includes Nikko Citigroup. The second holds the company's riskier assets and tougher-to-manage non-core ventures, including Nikko Cordial. It has been speculated that Citigroup would shed Nikko Cordial as part of its restructuring, but this is the first the Japanese retail bank has been mentioned.
Citigroup spokesman Mike Hanretta declined to comment on the report.
Citi shares rose 52 cents, or 17.1 percent, to $3.56 in afternoon trading. Bank of America rose $1.38, or 14.5 percent, to $10.93.
Investors are extremely anxious ahead of banks' first-quarter earnings reports, hoping for signs of improvement during the quarter. Reports from Citigroup, Goldman Sachs Group Inc. and JPMorgan Chase & Co. plan to report this week.
Over the past month, bank stocks have led the market higher, helping the major indexes stage their biggest four-week rally in more than 75 years. The surge was driven in part by encouraging announcements from several big bank CEOs that they were having a better quarter than most expected -- which helped fuel hopes for an economic recovery. Many hinge the end of the recession on the restoration of the nation's banking system.
But a handful of pessimistic forecasts about potential loan losses began to surface, jolting investors' newfound confidence. Wells Fargo, however, helped to solidify investors' hopes that huge spikes in revenue will help offset rising loan losses. Wells Fargo shares dipped 19 cents to $19.42 after surging 32 percent on Thursday.
On Monday, Rochdale Securities analyst Richard Bove started coverage of JPMorgan with a "Buy" rating, noting solid earnings potential. Though loan losses will likely remain elevated through 2011, the rate of growth of losses should slow, Bove said. At the same time, the bank's deposits and net interest income are growing at a fast clip.
JPMorgan added 68 cents, or 2.1 percent, to $33.43.
Regional banks also posted big gains on Monday. Huntington Bancshares Inc. soared 42 cents, or 19.5 percent, to $2.57, while Fifth Third Bancorp rose 60 cents, or 16.8 percent, to $4.18. Regions Financial Corp. added 24 cents, or 5.6 percent, to $4.55, while KeyCorp rose 40 cents, or 4.9 percent, to $8.65.
PNC Financial Services Group Inc. rose $1.17, or 3 percent, to $39.65, while U.S. Bancorp rose 30 cents to $17.94.
Future looks good for BAC...
Of course all financials are up, that much is obvious, but for how long? That's the big question and the answer is found in BAC's new market share coupled to its overall financial strength.
If you look at the acquisitions over the past 6 years BAC is in a very strong market share position and poised for maximum ROE with even a glimmer of recovery prospects.
This is why you can reasonably expect BAC to move into the teens soon, even against a receding market. Case in point, today BAC was up 8% while market was down 70 pts. Institutional investing is reading exactly what I am and they are making their play now. I am accumulating shares cautiously.
Given this optimistic report, I'm also prepared to move out of the market completely should we see too much (worse than expected) earnings coming in. many major companies will be reporting and nobody is expecting their reports to be Rosy.
The price of oil, gold and the old stand by, the VIX, should give us some good short term indication of an Overbought or Oversold situation for the broader market.
We've probably just met or are just about to meet the market tipping point where the recession ends and recovery begins. This is a very difficult call and can only be seen accurately in hindsight. Key factors to watch will be inventory, retail, and real estate, in that order. Real estate is a lagging indicator, as is unemployment numbers, but still good to watch for future trends and I consider unemployment slightly better of the two. The downside here is the unemployment numbers appear to be getting worse not better. This will gum up the works and we could see a slower than expected recovery in this recession. There's been a lot of damage and its all going to have to play itself out, not to mention the heavy burden of the TARP loans. That will impede recovery too, but most of you voted for Obama so I guess you won't mind.
A deep recession generally lasts about 22 months, this recession is very deep, now you do the math and your guess for recovery is as good as anyones.
PS I also like ACAS mostly because of their CEO. I think that ACAS could be return to double digits in the next 6 months, same could be said of PRU and ING. C is the weaker play due to poor management and debt load. GS is a favorite holding of mine and for a little bank stock with good potential, I like PBKS. Good luck, but remember, due your own due diligence.
52wk Range: 2.53 - 40.65
Volume: 575,119,938
Avg Vol (3m): 428,166,000
Market Cap: 70.16B
P/E (ttm): 19.78
EPS (ttm): 0.554
Div & Yield: 0.04 (0.40%)
Technicals
Record Volume
13-day MA Cross Above 50-day MA
Close Above the 50-day MA
Most Actives
Percentage Gainer
Last Price Quote is:
47.33%above 13-day MA
50.61%above 50-day MA
RS Rating: 22
Fundamentals
Earnings Expected on Apr 20
Key Data:
Market Cap (M): $61,166.74
P/E Ratio: 15.31
PEG Ratio: 2.94118
Next Earnings: 04/20/2009
Last Analyst Rating: Perform
updated chart look...
updated chart look...
Bank of America climbs, analyst ups price target
Bank of America stock advances, Stifel analyst upbeat on TARP loan payback
On Friday June 12, 2009, 3:20 pm EDT
NEW YORK (AP) -- Shares of Bank of America Corp. advanced on Friday, after a Stifel Nicolaus analyst said the company was on track to repay its government loans, raising his price target on the stock.
Shares rose 82 cents, or 6.3 percent, to $13.79 in afternoon trading.
Analyst Christopher Mutascio said in a note to clients on Friday that the Charlotte, N.C.-based bank's recent success in raising new capital puts it on track to repay $25 billion from the government's Troubled Asset Relief Program by the end of the year. The bank would be on track to repay its remaining $20 billion in early 2010, he said.
He raised his price target to $22 from $18 and reiterated a "Buy" rating on the stock. The new price target implies a premium of 70 percent over the stock's Thursday close of $12.97.
The federal government told Bank of America last month that it should raise $33.9 billion in capital to boost its reserves in case the economy worsens further. As part of its stress tests of the 19 largest U.S. banks, the government said Bank of America needed the most additional cash.
So far, the bank has raised nearly $33 billion and said it expects to top the government's required amount.
Bank of America has received $45 billion in government funds since the start of the financial crisis last fall, a portion of which was provided to help the bank manage massive losses from its acquisition of Merrill Lynch & Co.
On Thursday, House lawmakers questioned federal regulators, accusing them of orchestrating a "shotgun wedding" between Bank of America and Merrill that cost taxpayers $20 billion.
Shares of Bank of America have lost 8 percent since the start of the year.
Big Question...What will BAC do at the 200-day MA ?
I'm wondering if we'll bust right through it or retest it a few times... ???
52wk Range: 2.53 - 39.50
Volume: 448,295,799
Avg Vol (3m): 507,852,000
Market Cap: 87.85B
P/E (ttm): 16.10
EPS (ttm): 0.85
Div & Yield: 0.04 (0.30%)
Technicals
Most Actives
Percentage Gainer
Last Price Quote is:
13.33%above 13-day EMA
28.67%above 50-day EMA
RS Rating: 93
Fundamentals
Analyst Upgrade to Outperform
Key Data:
Market Cap (M): $75,939.18
P/E Ratio: 14.24
PEG Ratio: 3.04706
Next Earnings: 07/17/2009
Last Analyst Rating: Outperform
updated chart scene...
updated chart look...
52wk Range: 2.53 - 39.50
Volume: 241,624,517
Avg Vol (3m): 407,373,000
Market Cap: 83.81B
P/E (ttm): 15.36
EPS (ttm): 0.852
Div & Yield: 0.04 (0.30%)
Technicals
Close Above the 13-day MA
Most Actives
Last Price Quote is:
3.66%above 13-day MA
8.86%above 50-day MA
RS Rating: 87
Fundamentals
Coverage Initiated: Hold
Key Data:
Market Cap (M): $108,229.80
P/E Ratio: 28.27
PEG Ratio: 2.43421
Next Earnings: 10/13/2009
Last Analyst Rating: Hold
updated chart look...
updated chart look...
14 months of chart detail
BAC Criden & Love, P.A. Announces Amended Class Action...
by PR Newswire Mar 25 2011 4:53PM
MIAMI, March 25, 2011 /PRNewswire via COMTEX/ -- Criden & Love, P.A. ("Criden") today announced that an amended securities class action lawsuit was filed on March 25, 2011 in the United States District Court for the Southern District of New York on behalf of purchasers of Bank of America Corporation ("BAC"). (BAC) common stock during the period between July 23, 2009 and October 19, 2010, inclusive (the "Class Period"). If you wish to serve as lead plaintiff, you must move the Court no later than April 4, 2011. You need not seek to become a lead plaintiff in order to share in any possible recovery.
This action seeks damages for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The defendants are BAC, individually and as successor-in-interest to Countrywide Financial Corporation, Brian T. Moynihan, Charles H. Noski, Kenneth D. Lewis, and Joseph L. Price (collectively, "Defendants"). Prior to its acquisition by BAC, Countrywide was one of the world's largest residential mortgage lenders. As has now been widely reported, Countrywide's mortgage lending and servicing practices were rife with fraud, predatory tactics, and other misconduct. This action alleges that BAC adopted these practices and concealed material information and made false and misleading statements concerning the same, which artificially inflated the price of BAC stock until the truth was revealed.
Any member of the alleged class may seek to be appointed as lead plaintiff, even if that person has not filed a complaint, by complying with the relevant provisions of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). See 15 U.S.C. Section 78u-4(a)(2)(A)(i)-(iv). The Plaintiff - Patricia Grossberg Living Trust -- seeks to recover damages on behalf of the class and is represented by Criden, a firm with a strong background and significant experience in handling securities class actions and other complex litigation. If you have any questions about this Notice, the action, or your rights, please contact us at www.cridenlove.com .
SOURCE Criden & Love, P.A.
CHARLOTTE, N.C., Mar 24, 2011 (BUSINESS WIRE) -- Bank of America Corporation today announced it will report its first-quarter 2011 financial results on Friday, April 15. The results are scheduled to be released at 7 a.m. ET, followed by an investor presentation at 8:30 a.m. ET.
The live webcast, accompanying presentation and other earnings-related information will be available through the Bank of America Investor Relations website at http://investor.bankofamerica.com .
Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with more than 5,800 retail banking offices and approximately 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange
www.bankofamerica.com
SOURCE: Bank of America Corporation
Investors May Contact:
Kevin Stitt, Bank of America, 1.980.386.5667
Lee McEntire, Bank of America, 1.980.388.6780
Reporters May Contact:
Jerry Dubrowski, Bank of America, 1.980.388.2840
[email protected]
Bank of America (BAC) BAC trades, not surprisingly, at - 38.9 times EPS, 0.7 times book value per share, and 1.3 times revenues per share. In comparison, the industry averages are 28.2, 0.9, and 1.4, respectively. It is also worth noting that BAC traded near three times sales from 2001 to 2007. EPS was - $0.37 in 2010, after showing - $0.27 in 2009. The Street expects EPS to turn around in 2011. They give a range of $1.05 to $1.75. The company reports Q1 2011 results on April 11. As we wrote about here, we hate Bank of America and think Buffett was spot on when he dumped shares.
Day's Range: 13.32 - 13.53
52wk Range: 10.91 - 19.86
Volume: 115,332,233
Avg Vol (3m): 171,090,000
Market Cap: 135.02B
P/E (ttm): N/A
EPS (ttm): -0.37
Div & Yield: 0.04 (0.30%)
Technicals
Most Actives
Last Price Quote is:
-3.75%below 13-day EMA
-4.61%below 50-day EMA
RS Rating: 63
13-day MA cross below the 50-day MA
Here's The Bomb That Might Blow A Hole In Bank Of America...
After watching its stock tank 50% this year while denying that it needed capital, Bank of America's management has begun to acknowledge reality.
The bank raised $5 billion by selling preferred stock and options to Warren Buffett--diluting common shareholders in the process. And now, as previously promised, it has sold half its stake in China Construction Bank for $8 billion, as discussed in the accompanying interview.
These moves are good news for the bank's employees and shareholders, as well as for the US taxpayer, which will be on the hook if Bank of America's management flies the company into a mountain.
But many analysts believe that Bank of America will need to raise a lot more capital before it gets back on sound footing.
These analysts believe that Bank of America is still overstating the value of some of the assets on its balance sheet. When the company is finally forced to recognize the real values of these assets, this theory goes, the bank will once again have to fill a major capital hole.
Last week, we described the general concerns of one analyst, who is focused on a specific portion of Bank of America's humongous balance sheet: The company's portfolio of residential mortgages and home equity loans.
Below, we put some numbers on this possible exposure. Based on the analysis below, in this one asset category alone, Bank of America could be under-reserved by tens of billions of dollars. And that doesn't include its ongoing litigation exposure.
OVERVIEW
As we described last week, the analyst we spoke to is concerned that the performance of Bank of America's whole loans (mortgages and home equity loans) will ultimately mirror the performance of a national pool of "securitized" mortgage loans that were made during the housing bubble.
(The analyst is not a "short-seller." But he wants to preserve his anonymity so Bank of America and others won't be mad at him.)
Bank analysts have much more detail on the performance of the industry-wide securitized loan pool than they do on the individual banks' whole loans. And the analyst thinks it is fair to use the performance of the securitized loan portfolio as a proxy for the banks' whole loan portfolios.
The embedded losses in the national securitized loan portfolio are much higher than the losses Bank of America and other big US banks have reported thus far on their whole loan portfolios. And the analyst believes that the banks are using the leeway given them by US accounting rules to make the whole loan portfolios look better than they actually are. (Presenting a rosy view of loans allows the banks to avoid taking write-offs and, thus, avoid having to raise additional capital and further diluting their shareholders.)
Specifically, a recent analysis of the industry-wide portfolio of securitized loans by Amherst Securities breaks them down as follows:
TOTAL SECURITIZED LOANS: 4.6 million loans worth $1.2 trillion
This is made up of:
ALWAYS PERFORMING LOANS: 2.2 million loans worth $606 billion, 51% of total principal
NON-PERFORMING LOANS (in default): 1.4 million loans worth $370 billion, 31% of total principal
"RE-PERFORMING" LOANS (loans that were in default that are now performing, at least temporarily): ~900,000 loans worth $204 billion, 17% of total principal
So, in other words, of all the securitized loans outstanding, 49% (~$600 billion) are troubled and 31% (~$370 billion) are in default.
And there are two other points to keep in mind about the securitized loan pool:
The "recovery rate" on Non-Performing non-prime loans is only 36% (this is the portion of the original money owed that the lender gets back after foreclosure)
A net 2% of the "Re-Performing loans" become "non-performing" again each month (based on the May-June rate).
Assuming the industry-wide whole loan pool looks similar to the securitized pool--which the analyst I've talked to thinks is a fair assumption, given that they were both originated late in the housing bubble when house prices were high--we should eventually expect to see similar performance on the banks' whole loan portfolios.
SO WHERE DOES THAT LEAVE BANK OF AMERICA?
How much exposure does Bank of America have to residential real-estate loans? How is Bank of America saying these loans are performing? How much has the bank reserved for possible loan losses? Is it possible there are tens of billions of dollars of "embedded" losses hidden on the balance sheet?
These are the questions Bank of America analysts have to ask, even though Bank of America is not providing enough information to determine definitive answers.
As of June 30, per Bank of America's financial statements, here's what Bank of America's residential whole loan portfolio looked like:
Total residential loans: $413 billion (Composed primarily of $265 billion of first and second mortgages and $132 billion of home-equity loans--the latter of which are generally junior to the first mortgages and, thanks to plummeting house prices, may no longer have any actual "home equity" backing them up).
Total non-performing loans (per Bank of America): $19 billion, or 5% of the portfolio
Total provisions for loan losses: $21 billion, or 5% of the portfolio
In other words, Bank of America has classified 5% of its loan portfolio as "non-performing" and reserved $21 billion to cover the expected losses from these and other loans that go bad.
So how does that compare to the performance of the securitized loan portfolio described above?It looks downright fantastic!
In the securitized portfolio, 31% of the loans are "non-performing," versus only 5% of Bank of America's. And another 17% of the securitized loans are "re-performing," many of which will slip back into non-performing.
What scares the analyst I spoke to is his belief that much of Bank of America's loan portfolio may actually be just as bad if not worse than the securitized portfolio, despite what Bank of America is telling everyone.
In other words, the analyst thinks that 35% or more of Bank of America's loans might end up going into default, versus the 5% the bank says are in default today.
So how much would Bank of America have to take in losses if the analyst is right? (Or, put differently, how much would Bank of America have to increase its loan-loss provisions by to account for the likely performance of these loans?)
This analysis is very complex, even with the data available, and it involves several different types and classes of loans (first mortgages, second mortgages, home-equity loans, accruals, non-accruals, etc.). To keep things relatively simple, I'm going to take a very broad-brush approach. Doing this involves some technical inaccuracies, but it gets us to basically the same place.
Assuming Bank of America's loans mirror those in the securitized portfolio, here's a look at what the numbers might look like:
Total residential loans: $413 billion
Total non-performing: 31%, or $128 billion (vs. ~$19 billion currently)
Total re-performing: 17%, or $70 billion
In other words, if the securitized pool proves a reasonable proxy for Bank of America's loans, about 35% Bank of America's $413 billion of residential real-estate loans, or ~$145 billion, might eventually be in trouble--the non-performing percentage, plus a portion of the "re-performing."
(Of course, this "proxy" concept is a rough analysis. But without having detailed performance data on Bank of America's loans like we have on the securitized loans, it's impossible to get a clear picture of the situation.)
The next question is what sort of "recovery" Bank of America might get from these loans--and, therefore, what its loan-loss provisions should be.
As you'll recall, the "recovery rate" for non-performing loans in the securitized pool--the loans that go to foreclosure--is a dismal 36%. Loans that are permanently modified with a principal reduction, meanwhile (according to my analyst's estimate) might be expected to have a new carrying value of about 70% of the original loan amount.
If Bank of America's resolution of its potentially troubled loans were accomplished via foreclosure or principal writedowns, and its recovery rates mirrored those in the securitized loan pool, Bank of America might end up losing about 50% of the value of these loans.
So, what is Bank of America's exposure under this scenario?
A lot more than is currently reserved.
Possibly many tens of billions of dollars more.
(For example, if we assume that about $145 billion of Bank of America's loans might eventually be in trouble per the assumptions above and that the bank averages a 50% recovery rate, an appropriate loan-loss provision might eventually be, say, ~$70 billion. That's about $50 billion more than Bank of America's current loan loss reserve.)
BOTTOM LINE
It's possible that the analyst I've spoken with is wrong and that Bank of America's whole loans are vastly superior to the loans in the securitized pool--and, therefore, that its loan loss provisions are conservative.
It's also possible that the housing market and economy will soon start to recover in earnest and that lots of non-performing and "re-performing" loans will quickly become fully performing again.
But it's also possible that the housing market and economy will continue to deteriorate, in which case the performance of the securitized loan pool--and Bank of America's loans--might get even worse.
And it's possible that the analyst's logic is sound and that Bank of America will ultimately have to face the reality that the losses embedded in its whole loan portfolio are VASTLY higher than it has currently admitted and that it needs a lot more capital to offset them.
And this is only Bank of America's residential loans were talking about--we haven't even gotten to the commercial real-estate loans, consumer credit loans, European exposure, derivatives, and other exposures on the company's $2.2 trillion balance sheet. Or the potentially enormous liabilities associated with the mortgage-underwriting behavior of Bank of America's subsidiary Countrywide, for which the company seems to be hit with a new lawsuit every other day.
So it's no wonder that some analysts are persuaded that Bank of America needs to raise more capital.
Well researched detailed post.You have shared a great information . BAC is really a name we look for our financial aspect related problems. Thanks for such nice posting.
I found a similar entry on a completely different web site and did not really get it, but this posting explains it greater. Enjoy it! =-=