News and analysis of BAC
- 03/23/2021 – more upside for BAC
Bank of America CEO Says Its Earnings Are Poised to ‘Substantially Increase’ as Rates Rise
Bank of America’s earnings are set to “substantially increase” from higher interest rates as the bank deploys its large base of low-cost deposits into higher-yielding loans and other assets while keeping expenses under control, CEO Brian Moynihan told Barron’s in an interview.
Payment volume by the bank’s huge customer base was up about 7% in the first half of March versus the same period a year ago as the economy reopens and travel spending rises, Moynihan said. Food-service deliveries are a recent exception to that trend as restaurant capacity restrictions ease.
Moynihan said that the bank was eager to repurchase more stock, pending approval from federal regulators. He also said that investors should expect more releases of loan-loss reserves in 2021. The company began to release them in late 2020 after sharply building reserves earlier in the year.
- 08/17/2020 – $37 bil capital return is 16% on market cap today
Why Does Warren Buffett Like Bank of America?
A look at Berkshire’s largest bank holding
Bank of America’s required CET1 ratio is 9.5%, but its current CET1 ratio at the end of the second quarter is 11.6%. These numbers suggest that unless there’s a significant deterioration in loan losses, the bank can potentially return a substantial amount of capital to investors in the years ahead. The bank already has an impressive track record on this front. At the beginning of the year, Bank of America was targeting $37 billion of capital returns in 2020. That was equivalent to a shareholder yield of 12.2% at the time. In 2019, the ratio was around 14%.
All of the above indicates that Bank of America is a highly profitable company and is committed to returning capital to shareholders. Few other businesses offer the same kind of profitability and return profile.
Right now, investors can buy a share of this business for less than book value and less than 10 times earnings. From a value perspective, the stock is cheap, and from a quality perspective, it is also a desirable investment, in my opinion. These qualities make it clear why the Oracle of Omaha is interested in buying the business.
- 08/03/2020 – BAC: A strong capital position and a safe dividend, A conservative play with upside
Why Is Warren Buffett So Bullish on Bank of America?
Although banks are considered riskier right now, Bank of America has a very nice capital position and, in my opinion, a safe dividend
- 07/31/2020 – Buffett keeps buying BAC which can goes up to 25% stake. Good news for financial stock
Warren Buffett’s Berkshire Has Been Buying Up Lots of Bank of America. It Can Go Up to a Nearly 25% Stake.
Warren Buffett’s Berkshire Hathaway, which has been steadily increasing its stake in Bank of America (ticker BAC) recently, can hold as much as 24.9% of the bank’s stock, according to a banking regulator.
Investors like Berkshire are usually limited to a 10% stake in a bank. But Berkshire asked and received permission from the Federal Reserve Bank of Richmond in April to go over that threshold.
A spokesman at the Richmond Fed said that Berkshire can now go as high as 24.9%. That upper limit has not been previously reported.
It means that Berkshire can continue buying a lot more Bank of America stock if CEO Buffett chooses to do so.
Berkshire is already the largest shareholder of Bank of America, with a 11.8% stake. In recent weeks, Berkshire has added $1.7 billion to its Bank of America holding, based on filings. That stake now totals about $25 billion.
- 07/31/2020 – Buffett keeps loading up BAC every time stock price dips
Warren Buffett adds to his Bank of America buying spree, bringing stake to 11.8%
- A Securities and Exchange Commission filing showed Buffett’s conglomerate bought 21.2 million shares of the banking giant between Tuesday and Thursday.
- That increased Berkshire’s stake in Bank of America by $522 million and sets its total position in the bank at 11.8%.
- In total since the recent buying began, Berkshire has purchased $1.7 billion worth of the stock.
- 07/25/2020 – this is good for banks to be conservative in capital management
Banks lose out to capital markets when it comes to credit provision
That explains the Fed’s response to the latest economic crisis
This portrait of utterly dominant and dangerous banks exaggerated their importance and today looks out of date. Banks have become safer—including the investment banks, most of which are now part of big banking conglomerates. And they are being upstaged by a new wave of innovation in capital markets that has changed securitisation and debt issuance and led to more direct lending by other financial firms. As a result banks’ corporate lending as a share of gdp, for example, has stagnated at about 12%, even as they have rebuilt their strength and America Inc has indulged in a borrowing boom (see chart 1).
- 07/23/2020 – Buffett bought more BAC
- Warren Buffett scooped up 34M shares of Bank of America (NYSE:BAC) over the last few days – at an average price of about $24 – taking his stake in the banking giant to over 11% (from about 7.4%).
- Buffett made the move with BAC shares down nearly 32% since the beginning of the year. The stock is up 1.6% premarket on the news.
Buffett Adds to His Hefty Stake in Bank of America
Berkshire now holds an 11.3% interest in Bank of America. Berkshire won approval earlier this year from the Federal Reserve Bank of Richmond to lift its stake above 10%, the normal limit on investor ownership in banks. Past that point, purchases must be promptly reported. Buffett must like the stock because he prefers to keep his buys and sells quiet for as long as possible.
- 07/16/2020 – BAC earning drops, although not that bad
Bank of America shares drop as the firm sets aside another $4 billion for coronavirus-related loan losses
- The bank said it generated earnings of $3.5 billion, or 37 cents a share, exceeding the 27 cents a share expected by analysts surveyed by Refinitiv.
- However, revenue of $22.5 billion barely edged out analysts’ estimate of $22 billion.
- Bank of America’s trading division helped offset the drag caused by the coronavirus pandemic, although the firm’s trading results were less eye-popping than rivals JPMorgan Chase and Goldman Sachs.
- Bank of America’s bond trading revenue climbed 50% to $3.2 billion, and equities trading revenue climbed 7% to $1.2 billion.
- The lender increased reserves for credit losses by $4 billion, and lower interest rates sapped interest income by 11%.
This is good for BAC and the whole economy.
E=Estimate. Source: Bloomberg
As of today. the P/B of BAC is 1.17. This is quite lower than the historical average 1.8, and significantly lower than that of current JPM (1.59) and WFC (1.46).
3Q18 Finance Summary – A very strong quarter
Net income up 32% to $7.2 billion, driven by continuing strong operating leverage and asset quality, as well as the benefit of tax reform
• Diluted earnings per share up 43% to $0.66
• Pretax income up 18% to $9.0 billion
• Revenue, net of interest expense, increased 4% to $22.8 billion
– Net interest income (NII) increased $709 million, or 6%, to $11.9 billion, reflecting
benefits from higher interest rates, as well as loan and deposit growth; net interest yield of
2.42%, up 6 bps(A)
– Noninterest income increased $229 million, or 2%, to $10.9 billion
• Provision for credit losses decreased $118 million to $716 million
– Net charge-off ratio remained low at 0.40%
• Noninterest expense declined $327 million, or 2%, to $13.1 billion; efficiency ratio improved to 57%
• Average loan and lease balances in business segments rose $29 billion, or 3%, to $871 billion
– Consumer up 5% and commercial up 2%
• Average deposit balances rose $45 billion, or 4%, to $1.3 trillion
• Repurchased $14.9 billion in common stock
Earning presentation (BAC_3Q18_presentation)
Bank of America Should Seize Its Moment
BofA is minting money on higher rates, and has an opportunity to jumpstart its growth.
Bank Of America: Risk Of Going Sideways?
TimelessInvestor
News and analysis of BAC
News and analysis of BAC
Bank of America CEO Says Its Earnings Are Poised to ‘Substantially Increase’ as Rates Rise
Bank of America’s earnings are set to “substantially increase” from higher interest rates as the bank deploys its large base of low-cost deposits into higher-yielding loans and other assets while keeping expenses under control, CEO Brian Moynihan told Barron’s in an interview.
Payment volume by the bank’s huge customer base was up about 7% in the first half of March versus the same period a year ago as the economy reopens and travel spending rises, Moynihan said. Food-service deliveries are a recent exception to that trend as restaurant capacity restrictions ease.
Moynihan said that the bank was eager to repurchase more stock, pending approval from federal regulators. He also said that investors should expect more releases of loan-loss reserves in 2021. The company began to release them in late 2020 after sharply building reserves earlier in the year.
Why Does Warren Buffett Like Bank of America?
A look at Berkshire’s largest bank holding
Bank of America’s required CET1 ratio is 9.5%, but its current CET1 ratio at the end of the second quarter is 11.6%. These numbers suggest that unless there’s a significant deterioration in loan losses, the bank can potentially return a substantial amount of capital to investors in the years ahead. The bank already has an impressive track record on this front. At the beginning of the year, Bank of America was targeting $37 billion of capital returns in 2020. That was equivalent to a shareholder yield of 12.2% at the time. In 2019, the ratio was around 14%.
All of the above indicates that Bank of America is a highly profitable company and is committed to returning capital to shareholders. Few other businesses offer the same kind of profitability and return profile.
Right now, investors can buy a share of this business for less than book value and less than 10 times earnings. From a value perspective, the stock is cheap, and from a quality perspective, it is also a desirable investment, in my opinion. These qualities make it clear why the Oracle of Omaha is interested in buying the business.
Why Is Warren Buffett So Bullish on Bank of America?
Although banks are considered riskier right now, Bank of America has a very nice capital position and, in my opinion, a safe dividend
Warren Buffett’s Berkshire Has Been Buying Up Lots of Bank of America. It Can Go Up to a Nearly 25% Stake.
Warren Buffett’s Berkshire Hathaway, which has been steadily increasing its stake in Bank of America (ticker BAC) recently, can hold as much as 24.9% of the bank’s stock, according to a banking regulator.
Investors like Berkshire are usually limited to a 10% stake in a bank. But Berkshire asked and received permission from the Federal Reserve Bank of Richmond in April to go over that threshold.
A spokesman at the Richmond Fed said that Berkshire can now go as high as 24.9%. That upper limit has not been previously reported.
It means that Berkshire can continue buying a lot more Bank of America stock if CEO Buffett chooses to do so.
Berkshire is already the largest shareholder of Bank of America, with a 11.8% stake. In recent weeks, Berkshire has added $1.7 billion to its Bank of America holding, based on filings. That stake now totals about $25 billion.
Warren Buffett adds to his Bank of America buying spree, bringing stake to 11.8%
Banks lose out to capital markets when it comes to credit provision
That explains the Fed’s response to the latest economic crisis
This portrait of utterly dominant and dangerous banks exaggerated their importance and today looks out of date. Banks have become safer—including the investment banks, most of which are now part of big banking conglomerates. And they are being upstaged by a new wave of innovation in capital markets that has changed securitisation and debt issuance and led to more direct lending by other financial firms. As a result banks’ corporate lending as a share of gdp, for example, has stagnated at about 12%, even as they have rebuilt their strength and America Inc has indulged in a borrowing boom (see chart 1).
Buffett Adds to His Hefty Stake in Bank of America
Berkshire now holds an 11.3% interest in Bank of America. Berkshire won approval earlier this year from the Federal Reserve Bank of Richmond to lift its stake above 10%, the normal limit on investor ownership in banks. Past that point, purchases must be promptly reported. Buffett must like the stock because he prefers to keep his buys and sells quiet for as long as possible.
Bank of America shares drop as the firm sets aside another $4 billion for coronavirus-related loan losses
Regulator aims to make test scenarios more consistent from year to year, Quarles says
This is good for BAC and the whole economy.
How Bank of America compares with its peers.
E=Estimate. Source: Bloomberg
As of today. the P/B of BAC is 1.17. This is quite lower than the historical average 1.8, and significantly lower than that of current JPM (1.59) and WFC (1.46).
3Q18 Finance Summary – A very strong quarter
Net income up 32% to $7.2 billion, driven by continuing strong operating leverage and asset quality, as well as the benefit of tax reform
• Diluted earnings per share up 43% to $0.66
• Pretax income up 18% to $9.0 billion
• Revenue, net of interest expense, increased 4% to $22.8 billion
– Net interest income (NII) increased $709 million, or 6%, to $11.9 billion, reflecting
benefits from higher interest rates, as well as loan and deposit growth; net interest yield of
2.42%, up 6 bps(A)
– Noninterest income increased $229 million, or 2%, to $10.9 billion
• Provision for credit losses decreased $118 million to $716 million
– Net charge-off ratio remained low at 0.40%
• Noninterest expense declined $327 million, or 2%, to $13.1 billion; efficiency ratio improved to 57%
• Average loan and lease balances in business segments rose $29 billion, or 3%, to $871 billion
– Consumer up 5% and commercial up 2%
• Average deposit balances rose $45 billion, or 4%, to $1.3 trillion
• Repurchased $14.9 billion in common stock
Earning presentation (BAC_3Q18_presentation)
Bank of America Should Seize Its Moment
BofA is minting money on higher rates, and has an opportunity to jumpstart its growth.
Bank Of America: Risk Of Going Sideways?
About Timeless Investor
My name is Samual Lau. I am a long-term value investor and a zealous disciple of Ben Graham. And I am a MBA graduated in May 2010 from Carnegie Mellon University. My concentrations are Finance, Strategy and Marketing.