Bank of America still haunted by its past
The company's controversial acquisitions of Merrill Lynch and Countrywide are still dragging down its numbers.
Any optimism JPMorgan Chase (JPM) and Wells Fargo (WFC) gave banking investors Friday after reporting stellar profits and a surge in mortgage refinancing is being tempered by Citigroup's near-ignorance of the housing sector and Bank of America's wonky books. Analysts speaking to Reuters projected a net loss of $94.58 million for Bank of America, or 7 cents a share, on $21.89 billion in revenue. Analysts at Zacks were less kind, dropping Bank of America's earnings estimate from 13 cents a share to 0 cents. That's a 100% drop from 28 cents per share a year ago.
The fallout from the bank's Merrill Lynch purchase four years ago and a legal mess surrounding the mortgage underwriting practices of Bank of America's other 2009 acquisition, Countrywide Financial Services, are creating pressure that the bank's bottom line can barely withstand.
The latter issue affected Morgan Stanley (MS) analysts' decision to cut their earnings estimate for Bank of America in early October. Low interest rates are already squeezing the bank's margins on loans, but scrutiny of its home lending and lawsuits against Countrywide are stifling loan volume that helps the banks competitors overcome those tiny rates.
Bank of America, like other banks, used funds from the Federal Reserve to cover bad loans and bolster its numbers. Unfortunately for Bank of America, Wall Street Journal analysts say 46% of the bank's profits in the last four quarters came from Uncle Sam's handouts.
That puts Bank of America in a tough enough spot without another $1.6 billion to $1.9 billion charge against its earnings. But that's the hit Bank of America's going to have to take this quarter after agreeing to pay $2.4 billion to settle a shareholder lawsuit last month. The class-action suit was filed in 2009 and alleged that Bank of America misled investors about Merrill Lynch's financial well-being when it purchased the brokerage in 2009 for roughly $50 billion, or 70% more than its last share price.
Despite the overwhelming odds against it, Bank of America could still buck expectations with some help from the housing market. Freddie Mac's interest rates for 30-year fixed rate mortgages are still hovering around 3.4% and prompting a stream of refinancing and home sales for those fortunate enough to secure credit.
Existing home sales jumped 7.8% in August from the same time last year, while the national median home price has increased for six straight months to $187,000, according to the National Association of Realtors. That's 9.5% higher than it was during the same period in 2011 and supported by the S&P/Case-Shiller index of home values in 20 cities, which climbed 1.2% in July from the same time last year. That was the index's biggest 12-month jump since August 2010.
If that potential housing comeback helps mortgage holders and homebuyers look past Countrywide and consider Bank of America, it could help salvage the quarter and the bank's numbers going forward. Barring that, it's looking bleak for BAC.
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Bank of Unamerica has a projected loss of 94 million for a quarter. Bank of UnAmerica paid out 4.4 BILLION dollars in just BONUSES to the top fat pigs in 2010, and even more in 2011. A 94 million loss is comparing the salary of a bank teller to the top fat pig at Bank of Unamerica who makes $5000 per hour, and requires a teller to work 11 weeks to make what he makes in 60 minutes.
And they think the problem is the economy and that they can't rape consumers with debit card fees anymore is the cause of their downfall.
Cut their bonus pool to their fat pigs by 2% and that would roughly COVER their entire loss for the whole quarter. But, can't do that. Pigs need another vacation home, 4 more cars and a new helicopter.
I would never use BOA for my banking but, I love BOA stock
I bought $100k worth of BOA stock when it dropped below $5.00 and sold at over $9.00
Now that I sold I don't care what happens to them.
I never let my personal feelings get in the way of a good investment.......If I can make money I don't care how they treat thier customers,nobody forced anybody to use thier services
Use em when you can!! (that's what BOA does)
At least that's the way I see it
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All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.
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