BofA Grows Book Value, Trades At Deep Discount On Earnings (BAC, C, JPM)

Bank of America Corporation (NYSE: BAC) is trading lower after its earnings report, but there are some points in here that can appeal to both bulls and bears alike.  The ban reported earnings of $0.56 EPS after a China Construction Bank gain and it had a gain from credit spreads as we have seen at Citigroup Inc. (NYSE: C) and at J.P. Morgan Chase & Co. (NYSE: JPM).  The number is not exactly an Apples-to-Apples comparison but the estimate was $0.20 EPS from Thomson Reuters.

The figure for reported revenue was up 6% for the third quarter to $28.7 billion.  Thomson Reuters had estimates of $25.95 billion for the quarter.  This quarter is boosted by gains and it compares to a huge loss a year ago from charges recorded then.

Tier 1 common equity ratio was 8.65%’ tangible common equity ratio was 6.25%; and the common equity ratio was 9.50%.  The bank also reduced the size of its balance sheet by $42 billion from just the quarter before.  The provision for credit losses declined 37% from the year-ago quarter.

We have already noted that all banks’ book values are a ceiling now, but Bank of America is trading at a substantial discount to book value now: Tangible book value per share rose to $13.22 in the quarter, compared to $12.91 a year earlier and compared to $12.65 in the second quarter.  The stated book value per share was $20.80 in the third quarter, down from $21.17 a year earlier and up from $20.29 in the second quarter of 2011.

Bank of America shares were lower by more than 3% earlier, but shares are now down about 1% around $5.96 with close to 2 hours until the market opens.

For whatever it is worth, Bank of America was expected by many to have a decreasing book value per share rather than an increased book value per share.  It is the endless line of liabilities and regulatory hurdles affecting profitable operations that continue to remain as huge overhangs.

JON C. OGG