Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nyse  >  Bank of America Corp    BAC

SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets 
The feature you requested does not exist. However, we suggest the following feature:

Bank of America : How Banks Have Escaped the Worst of the Retailing Meltdown

share with twitter share with LinkedIn share with facebook
share via e-mail
0
05/28/2017 | 01:15pm CEST
By Lillian Rizzo and Rachel Louise Ensign 

When oil prices tumbled to multiyear lows in 2016, the pressure quickly spread to banks that lent to energy companies.

This year, a far different story is playing out for banks as the U.S. retailing industry endures a major shake-up that has led to a spike in bankruptcy filings.

Changing shopper habits and the increasing dominance of Amazon.com Inc. have led retail bankruptcies to hit their fastest pace since the financial crisis -- 21 this year through Tuesday, according to data from S&P Global Market Intelligence. In recent months, retailers Payless ShoeSource Inc., BCBG Max Azria Group LLC and Limited Stores Co. have all filed for bankruptcy.

While many of these companies are saddled with a variety of debt, the "asset-based loans" popular with banks are among the safest. That is because the loans are typically backed by stores' inventories or accounts-receivable.

Banks have made asset-based loans to 15 of the 21 retailers that filed for bankruptcy since the beginning of 2017, according to a Wall Street Journal review of court filings and the S&P data. But those loans are all repaid or expected to be repaid, according to bankruptcy documents.

That has led bank executives and other industry observers to shrug off the risks these distressed retailers pose. The industry's troubles are "bad for retail, but not so bad for banks," says Glenn Schorr, a bank analyst at Evercore ISI.

On a conference call last month, J.P. Morgan Chase & Co. CEO James Dimon played down the risks of retailers to the nation's largest bank. "There'll be something there, but it's nothing that will be dramatic when it's happening," he said, adding that J.P. Morgan has scrutinized its exposure to retailers, as well as property occupied by them and vendors who sell to them.

Still, the troubled industry has the potential to cause other headaches, particularly for smaller banks that do a lot of commercial real-estate lending.

"This issue clearly isn't going away," Christopher E. McGratty, an analyst at Keefe, Bruyette & Woods Inc., said recently. He expects smaller banks, some with 20% of their commercial real estate exposure focused on retailers, will start to give more disclosure soon on different types of borrowers they serve, from strip malls to big-box stores.

Overall, Keefe, Bruyette & Woods estimates that banks have $270 billion of retail-related commercial real-estate loans.

Banks have taken on some of their most direct exposure to retailers through asset-based loans, which typically get paid back before those to other lenders. Asset-based "lenders historically have recovered 100% of their exposure" in retail bankruptcies, said David M. Hillman, a restructuring partner at Schulte Roth & Zabel LLP.

Commercial loans to retailers are larger than energy exposure at many banks. Retailers represent Bank of America Corp.'s third-biggest industry exposure in its commercial-lending book, for instance, and the bank extended $41.6 billion to the sector at the end of 2016. By contrast, the bank lent $19.7 billion to the energy industry.

Bank of America or Wells Fargo & Co. were lenders in nine of the 21 recent retail bankruptcies. The two banks have also lent money to troubled retailers that haven't filed for bankruptcy protection, like Sears Corp. and BonTon Stores Inc.

Banks generally take reserves against potential losses when they see borrowers that might be at risk. In the case of retailers, the amounts generally haven't been big enough to show up in broader reserve levels at big banks, Mr. Schorr said. That is a contrast to last year, when energy lending led banks to post large increases in reserves broadly.

One reason for the difference: In energy, the commodity-price declines were felt widely across the industry. Loans to troubled retailers, on the other hand, are balanced out by online stores and other chains that are performing better.

Another distinction is that the value of the retailers' collateral underlying the loans has held up better than in energy. "The inventory and accounts receivable value doesn't fluctuate as much as commodities' prices do," said Mr. Hillman.

This month's bankruptcy filing of rue21 Inc., a teen retailer, exemplified how banks loans can be safe even when other lenders face losses. The retailer, which sells everything from prom dresses to candles for different astrological signs, had a $72 million loan led by Bank of America.

That loan is expected to be paid back in full from the proceeds of liquidation sales of about 400 of its nearly 1,200 stores in coming months, according to the proposed restructuring agreement.

Unlike many other retailers, rue21's debt goes beyond what is owed to banks, landlords and vendors. The Pennsylvania retailer owes $521 million on a so-called term loan owned largely by hedge funds. Instead of getting paid back relatively quickly, those lenders plan to swap their debt for equity in a reorganized company. There is also $250 million worth of rue21's unsecured bonds, whose holders are slated to get a 4% equity stake, as well as the right to pursue certain legal actions, if they vote "yes" to the proposed reorganization.

Write to Lillian Rizzo at [email protected] and Rachel Louise Ensign at [email protected]

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on BANK OF AMERICA CORP
01:15pDJBANK OF AMERICA : How Banks Have Escaped the Worst of the Retailing Meltdown
05/27 BANK OF AMERICA : public records
05/27 BANK OF AMERICA : Suspected Harlingen bank robber caught
05/27 BANK OF AMERICA : Suspect arrested in bank robbery
05/27 BANK OF AMERICA : robbery suspect caught
05/27 BANK OF AMERICA : Cops use Taser on wig-wearing fraud suspect outside bank
05/26 BANK OF AMERICA : Littleton police department
05/26 BANK OF AMERICA : Meet Charlotte Mecklenburg Library's new board member, Joe Hel..
05/26 BANK OF AMERICA : Citizens National Bank breaks ground on new branch office
05/26 BANK OF AMERICA : Business Combined Properties announces new leases
More news
Sector news : Banks - NEC
05/26 TSX ekes out gain in low volume trade ahead of U.S. holiday
05/26 Legal & General, Aviva plan Ireland moves post-Brexit
05/26 CATHAY FINANCIAL : Taiwan's Cathay Financial units to buy Bank of Nova Scotia's ..
05/25DJWELLS FARGO : Sweetens Broker Recruitment Bonuses-- 2nd Update
05/25DJWELLS FARGO : Sweetens Broker Recruitment Bonuses--Update
More sector news : Banks - NEC
News from SeekingAlpha
05:28a Look For A Preferred Exit At Bank Of America
05/27 Jump on bank stocks ahead of the stress tests - Barron's
05/26 RETIREMENT STRATEGY : Making Money Without Spending A Penny Out Of Pocket!
05/26 Citigroup Is Outperforming The Big Banks
05/26 Tracking Stephen Mandel's Lone Pine Capital Portfolio - Q1 2017 Update
Advertisement
Financials ($)
Sales 2017 89 470 M
EBIT 2017 33 981 M
Net income 2017 19 686 M
Debt 2017 -
Yield 2017 1,64%
P/E ratio 2017 12,64
P/E ratio 2018 10,73
Capi. / Sales 2017 2,59x
Capi. / Sales 2018 2,48x
Capitalization 231 282 M
More Financials
Chart BANK OF AMERICA CORP
Duration : Period :
Bank of America Corp Technical Analysis Chart | BAC | US0605051046 | 4-Traders
Full-screen chart
Technical analysis trends BANK OF AMERICA CORP
Short TermMid-TermLong Term
TrendsNeutralNeutralBullish
Technical analysis
Income Statement Evolution
More Financials
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 33
Average target price 25,8 $
Spread / Average Target 11%
Consensus details
EPS Revisions
More Estimates Revisions
Managers
NameTitle
Brian T. Moynihan Chairman, President & Chief Executive Officer
Catherine P. Bessant Co-COO & Chief Technology Officer
Tom Montag Co-Chief Operating Officer
Paul M. Donofrio Chief Financial Officer
Thomas J. May Independent Director
More about the company
Sector and Competitors
1st jan.Capitalization (M$)
BANK OF AMERICA CORP5.16%231 282
JPMORGAN CHASE & CO.-1.09%303 267
INDUSTRIAL AND COMMRCL..18.59%263 719
WELLS FARGO & CO-4.90%261 909
CHINA CONSTRUCTION BAN..17.10%224 185
BANK OF CHINA LTD7.56%198 433
More Results