BofA Missed Opportunity, But Now Under Book Value (BAC, AGO)

Bank of America Corporation (NYSE: BAC) is out with its first quarter earnings and there is some ammo for bulls and bears alike.  Earnings of $2.05 billion were reported as $0.17 EPS and revenues were $26.88 billion.  Thomson Reuters has consensus estimates of $0.27 EPS and $26.69 billion in revenues.  Those estimates had been trimmed in recent days ahead of the earnings.

The capital ratios are going to be key since the bank was denied the right to lift its dividend.  The tier-1 capital ratio is listed as 11.32% and the Tier-1 common equity ratio was 8.64%.  Charge-offs were $6.03 billion and non-performing loans were listed as $31.6 billion.  The allowance for loan losses was $39.8 billion with a loan loss ratio of 4.29%.

One key aspect that investors will look at is book value, which came in at $13.21 per share at the end of the quarter.  Whether you ar a BofA bull or bear, this matters.  As far as how that compared to the December 31, 2010, we went back and found that the figure then was $12.98 in book value per share and when it reported earnings on January 21, 2011 its shares had closed at $14.53 the day before and closed at $14.24 on that day of the earnings report.

Two non-earnings issues are that Bruce Thompson is taking over as CFO and the bank announced a mortgage repurchase claims agreement with Assured Guaranty Ltd. (NYSE: AGO).  Assured said that BofA and subsidiaries like Countrywide settled transactions insured by Assured Guaranty over reimbursement for breaches of representations and warranties and historical loan servicing issues.  The settlement includes a payment of $1.1 billion to Assured Guaranty as well as a loss-sharing reinsurance arrangement on 21 first lien RMBS transactions that have a gross par value of $5.2 billion and $4.8 billion in par outstanding balance.

As far as the breakdown of the pros and cons without the blow-by-blow dollar amounts… BofA cited earnings and revenues, BofA cited lower credit costs, gains from equity investments, higher asset management fees, higher investment banking fees, and declines continuing in bankruptcies and delinquencies. The bank cited the drag as being from higher legacy mortgage costs, as well as lower sales and trading revenues.

Bank of America closed at $13.13 yesterday after hitting a low so far in 2011 of $13.07.  With more than two hours until the market opens for trading, Bank of America shares are indicated around $13.01 or $13.02.  Some still-bullish investors may heed that $13.21 book value as a safety net, but the bears may argue that the figure should act more like a ceiling.  Stay tuned.

JON C. OGG