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    BAC

BANK OF AMERICA (BAC)
Mes dernières consult.
Most popular
Report
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets

Q1 bank results face great expectations

share with twitter share with LinkedIn share with facebook
share via e-mail
0
04/08/2012 | 01:43pm CET

Bank executives face great expectations from investors when they report first-quarter results beginning Friday.

Bank stocks have shot up 24 percent this year, as measured by the KBW Banks index, in their steepest ascent in any quarter since the end of September 2009.

Now investors want to know if they should stick with their bets that the economy will strengthen and lift bank lending margins and profits, or take their gains and get out.

"Investors are out on a limb," said Jack Ablin, chief investment officer at Harris Private Bank.

They won't get much help from the earnings, which are expected to be murky this quarter and confused by accounting items. Investors may have to rely on their own hunches to sort conflicting numbers and comments from bank executives about the unfolding course of the economy.

Chris Bingaman, a portfolio manager at Diamond Hill Capital Management in Columbus, Ohio, is among the buyers. Bingaman, whose firm manages $9 billion, said he's been picking up shares of Wells Fargo & Co, JPMorgan Chase & Co, U.S. Bancorp and PNC Financial Services Group Inc lately. The prices, compared with expected future cash flows, are still attractive, he explained.

Still, Bingaman called the banks "revenue challenged" because bank customers remain reluctant to borrow and profit margins are being held down by low interest rates. "That puts a damper on revenue growth overall," Bingaman said.

At the least, Bingaman said, he wants to see the banks report that their lending margins have stopped contracting. Net interest margins at JPMorgan, for example, were down to 2.70 percentage points in the fourth quarter of 2011 from 2.88 points a year earlier and 3.33 points in 2009.

Even if the contraction were to stop, at least another three to six months must pass before lending margins actually increase, said Chris Kotowski, an analyst at Oppenheimer. "You need to see more loan growth," he said.

But Kotowski said that the current slow growth in loan portfolios is a big step from the shrinkage two years ago and points toward increasing momentum in borrowing and a stronger recovery in bank profits. "Slowly, but surely, people are going to realize that this is for real," Kotowski said.

In the meantime, sorting out what is real could be difficult. Some banks will likely report loan growth that stems not from new demand from customers for funds, but from taking business from competitors, said analyst Paul Miller of FBR Capital Markets & Co.

"The overall economic growth needed for loan growth still is not there," Miller said. Loan balances at banks in recent weeks have been running about 4.0 percent higher than a year earlier, according to Federal Reserve data, but some of that increase is thought to have come at the expense of European banks and lenders in the capital markets.

JPMorgan and Wells Fargo kick off bank earnings Friday morning. For 81 financial companies in the S&P 500 stock index, first-quarter earnings are expected to be up 6.5 percent from a year ago, according to surveys of analysts by Thomson Reuters I/B/E/S through April 4. For the full year, analysts expect the earnings will be up 22.4 percent from 2011.

Underneath the averages are likely to be confusing cross-currents about whether the quarter was good or bad. For example, while profits are expected to be higher for banks in general, earnings per share will be down in the first quarter from a year earlier for JPMorgan and Citigroup Inc, according to surveys of analysts.

But compared with the fourth quarter, profits for JPMorgan and Citigroup are expected to be higher. The big reason for the expected flip-flop in fortunes for the two banks: Their trading and investment banking business in the first quarter were worse than a year before but better then three months ago.

Profit from making new mortgages is expected to counterbalance the loss of fee income from new restrictions on how much banks can charge merchants for debit card transactions.

Wells Fargo and JPMorgan have big mortgage operations and some regional banks, such as SunTrust Banks Inc and Fifth Third Bancorp could get a lift, too. Though most new mortgages are used now to refinance existing loans, they are generating additional revenue for the banks.

"We're going to see decent earnings for banks that embrace mortgage banking," said Miller of FBR Capital Markets & Co. "It's probably some of the most profitable stuff you can do."

With overall revenue weak, bankers know investors will be looking hard at their expenses. At Bank of America Corp, whose shares are up 66 percent this year, more than any other big bank, executives are expected to supplement their April 19 earnings report with details of the second phase of a campaign that has already set out to eliminate $5 billion in annual expenses and 30,000 jobs.

Analysts caution that there are at least two wild cards that could rock the results of the biggest banks: trading revenue and the impact of accounting adjustments, known as debt valuation adjustment or DVA, which must be made for changes in the value of debts the banks owe.

Bond trading increased as investors were more willing to take on risk in the quarter than they were at the end of the year. But profit margins for the dealers tightened.

Overall, quarterly revenue from fixed income, currency and commodity trading at the investment banks was likely down more than 20 percent from a year earlier, but up more than 100 percent from three months earlier, analyst David Konrad of Keefe, Bruyette & Woods wrote in a report April 2.

Equity capital markets volumes and fees for advising completed takeovers were down about 25 percent in the quarter from a year earlier, according to Thomson Reuters data.

The accounting adjustments known as DVA perversely reduce the reported earnings of banks when their creditworthiness improves. Because analysts vary in how much work they do to factor DVA into their earnings estimates, the adjustments can create confusion about whether banks actually missed or beat Wall Street expectations.

Bank stock buyers may chose to ignore the accounting noise and the mixed signals. "The psychology seems to be getting better," said Frank Barkocy, director of research at Mendon Capital Advisors. "We're continuing to see signs of improvement in the US economy."

(Reporting by David Henry in New York and Rick Rothacker in Charlotte, North Carolina. Editing by Alwyn Scott.)

By David Henry and Rick Rothacker

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on BANK OF AMERICA
12/16 BANK OF AMERICA : At Norfolk apartment building, underground cash vault operator..
12/16 BANK ROBBER CAUGHT AFTER CRASHING SU : Fbi
12/16 POLICE : Harwood Heights man hit cab driver after learning fare amount
12/15 BANKING IN DEPTH : Embracing disruption, transformation and high-touch customer ..
12/15 BANK OF AMERICA : Business News
12/15 FEDS : Bank robber ran into Chicago River with tracking device
12/15 BANK OF AMERICA : Glendale bank robbery suspect remains on the loose as authorit..
12/14 BANK OF AMERICA : Art Auction to Support Veterans Services at NYU Langone Raises..
12/14 BANK OF AMERICA CORP /DE/ : Change in Directors or Principal Officers, Financial..
12/14 BANK OF AMERICA : Names Maria Zuber to Board of Directors
More news
News from SeekingAlpha
12/15 MY JOURNEY TO FINANCIAL INDEPENDENCE : 86-Stock November Portfolio Update - Buyi..
12/14 Year End Report Card On My Bank Recommendations
12/14 Bank Of America - 2018 Favorite
12/13 Front Running 2018
12/13 RETIREMENT STRATEGY : Applying My Simple Strategy To The Dividend King Retiremen..
Financials ($)
Sales 2017 89 174 M
EBIT 2017 33 321 M
Net income 2017 19 410 M
Debt 2017 -
Yield 2017 1,34%
P/E ratio 2017 15,99
P/E ratio 2018 13,35
Capi. / Sales 2017 3,40x
Capi. / Sales 2018 3,28x
Capitalization 303 B
Chart BANK OF AMERICA
Duration : Period :
Bank of America Technical Analysis Chart | BAC | US0605051046 | 4-Traders
Technical analysis trends BANK OF AMERICA
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 32
Average target price 29,0 $
Spread / Average Target -0,25%
EPS Revisions
Managers
NameTitle
Brian T. Moynihan Chairman, President & Chief Executive Officer
Catherine P. Bessant Co-COO & Chief Technology Officer
Thomas Kell Montag Co-Chief Operating Officer
Paul M. Donofrio Chief Financial Officer
Thomas J. May Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
BANK OF AMERICA30.50%302 905
JP MORGAN CHASE & COMPANY22.27%368 277
INDUSTRIAL AND COMMRCL BANK OF CHINA LTD33.56%306 922
WELLS FARGO7.46%295 032
CHINA CONSTRUCTION BANK CORPORATION28.31%238 071
BANK OF CHINA LTD12.21%205 185