Bank of America Lives Up to Earnings & Book Value Comparisons (BAC, JPM, C)

Banking, finance, and taxes

Published: July 19, 2011 7:25 am

Last Updated: March 30, 2020 5:23 pm

Bank of America Corporation (NYSE: BAC) met earnings estimates this morning with its loss of -$0.90 EPS due to its multi-billion settlement announced at the end of June. The total loss is $8.8 billion. Net income would have been $0.33 EPS had it not been for the extraordinary items. A year ago, it earned $0.27 EPS.

The current climate shows the comparisons of major institutions to their book value in banking. BofA trades at a steep discount. The company noted that tangible book value per share was $12.65, down from $13.21 in the first quarter of 2011 and up from $12.14 in the second quarter of 2010. The company’s stated book value per share was listed as $20.29 as of June 30, down from $21.15 in the first quarter and down from $21.45 in the same period of 2010.

J.P. Morgan Chase & Co. (NYSE: JPM) traded at about 0.9-times book and Citigroup Inc. (NYSE: C) traded closer to 0.8-times book value after earnings. If we use the tangible book value figure that comes to a base case of $12.65, a ratio of 0.8-times book value comes to $10.12 and a ratio of 0.75-times book value is about $9.50.

Bank of America shows that its risk-weighted assets fell $41 billion, but it also showed that its global excess liquidity rose $16 billion sequentially to $402 billion as of June 30. It also turned in regulatory capital ratios above prior estimates:

Tier 1 common equity ratio at 8.23%
tangible common equity ratio at 5.87%
provision for credit losses fell 60% year over year
net charge-offs fell again with improved credit quality in most consumer and commercial portfolios
allowance for loan and lease losses to annualized net charge-off coverage ratio increased to 1.64 times from 1.18 times a year earlier

The company also showed a record for its Global Banking and Markets unit for investment banking fees at $1.6 billion. Bank of America claims to have extended $147 billion in credit in the second quarter, with about $40 billion in residential first mortgages funded during the quarter. That was almost 194,000 homeowners who either bought a house or refinanced an existing mortgage. Average deposit balances rose 4% or $44 billion to $1.04 trillion.

Bank of America closed at $9.72 yesyerday and shares hit a 2-year low of $9.53 yesterday. So far the shares are up around $9.90 in pre-market trading with over two hours until the market opens. The hope now is that this is not just another “gap and crap” news-pop that sees itself reversed throughout the day and the following days.

Yesterday we gave a list of the banks which were trading above book value for comparison.

JON C. OGG

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