Bank of America Corp. (NYSE: BAC): Q2 Earnings Preview 2011

Bank of America Corp. (NYSE: BAC), the largest US bank by assets, is scheduled to release its second-quarter earnings before the opening bell on Tuesday, July 19, 2011. Analysts, on average, expect the company to report a loss of 90 cents per share on revenue of $12.34 billion. In the year ago period, the company reported earnings of 27 cents per share on revenue of $29.15 billion.

Bank of America Corporation, a financial holding company, provides a range of banking and nonbanking financial services and products in the United States and internationally. The bank is greatly exposed to consumers with large residential mortgage, home equity, credit card, and consumer loan balances. Its commercial loan book is also large and depends on an improving economy. Bank of America’s acquisition of Merrill Lynch has also made it a significant player in the investment banking world.

In the preceding first quarter, the Charlotte, North Carolina-based bank's net income was $2.05 billion, or 17 cents per share, compared with a profit of $3.18 billion, or 28 cents a share, in the year-ago quarter. Revenue totaled $27.1 billion, down from $32.29 billion in the first quarter of 2010. Analysts, on average, expected the company to report earnings of 28 cents per share on revenue of $27.08 billion.

Improving business activity has helped banks reduce provisions for credit losses and improve margins on both credit cards and mortgages. Bank of America saw mixed results in 2010 with macroeconomic improvement that allowed the firm (as well as other banks) to reduce reserves for losses, bolstering profits. Banking industry has also benefited from continued credit improvement and return to positive loan growth. 

However, the company has been struggling to win back the confidence of shareholders. It's been a tough year so far for Bank of America stock, with shares skidding 22%. Investors have braced for a number of big financial hits connected with Bank of America's mortgage business. The bulk of the write-downs and losses are the result of Bank of America's 2008 acquisition of Countrywide Financial, a star-crossed deal that cost some $4 billion.

Chief Executive Officer Brian T. Moynihan has been rebuilding capital and has vowed to reduce risk in Bank of America’s holdings. He’s spent or earmarked at least $30 billion to quell losses ties to the company’s home lending and foreclosures. 

Bank of America has already announced more than $12 billion in settlements with various parties related to these "representations and warranties." Last month, the company agreed to pay $8.5 billion to settle claims by a group of high-profile investors burned by fraudulent mortgage securities. Bank of America also disclosed a $5.5 billion second-quarter provision tied to its exposure to government-run mortgage giants Fannie Mae and Freddie Mac. The bank also expects to record $6.4 billion in other mortgage-related charges in the period, including $2.6 billion to write off the balance of goodwill in the consumer real-estate services business. Excluding mortgage and other items, Bank of America expects earnings of 28 cents to 33 cents a share for the second quarter.

Full Disclosure: None.

Bank of America Corp. (NYSE: BAC): Q1 Earnings Preview 2011

Bank of America Corp. (NYSE: BAC), the largest US bank by assets, is scheduled to release its first-quarter earnings before the opening bell on Friday, April 15, 2011. Analysts, on average, expect the company to report earnings of 28 cents per share on revenue of $27.08 billion. In the year ago period, the company reported earnings of 28 cents cents per share on revenue of $31.97 billion.

Bank of America Corporation, a financial holding company, provides a range of banking and nonbanking financial services and products in the United States and internationally. The bank is greatly exposed to consumers with large residential mortgage, home equity, credit card, and consumer loan balances. Its commercial loan book is also large and depends on an improving economy. Bank of America’s acquisition of Merrill Lynch has also made it a significant player in the investment banking world.

In the preceding fourth quarter, the Charlotte, North Carolina-based bank's net loss was $7.3 billion, or 77 cents per share, compared with a loss of $2.2 billion, or 26 cents a share, in the year-ago quarter. The latest fourth-quarter results included a non-cash, non-tax deductible goodwill impairment charge of $2 billion applicable to the Home Loans and Insurance segment. Excluding the charge, net income was $756 million or $0.04 per share, compared to a net loss of $194 million or $0.60 per share in the year-ago quarter. Total revenue, net of interest expense, for the quarter decreased to $22.40 billion from $25.08 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 15 cents per share on revenue of $25.46 billion.

Improving business activity has helped banks reduce provisions for credit losses and improve margins on both credit cards and mortgages. Bank of America saw mixed results in 2010 with macroeconomic improvement that allowed the firm (as well as other banks) to reduce reserves for losses, bolstering profits. Banking industry has also benefited from continued credit improvement and return to positive loan growth. The company extended more than $685 billion in credit to individuals, small businesses, nonprofits and large companies in fiscal year 2010, including the extension in $92 billion of credit to small and medium-sized businesses, exceeding the bank's goal of $86 billion. Credit extended in the fourth quarter of 2010 amounting nearly $188 billion, reflects a nearly 4.5 percent increase from same period last year.

The company has taken several steps to improve its capital cushion and has positioned itself for profitability. Recently, Bank of America agreed to sell its Balboa Insurance unit to Australia's largest insurer QBE Insurance Group Ltd. for an upfront cash payment of about $700 million in addition to future payments. The transaction, subject to regulatory approvals, is expected to be completed in mid-2011. Bank of America noted that the sale is consistent with its strategy to focus on businesses that directly serve customers and clients around the world while continuing to strengthen its balance sheet. Bank of America said the transaction is expected to result in a one-time after-tax gain and benefit its Tier 1 common capital, including a reduction in goodwill and other intangibles. 

Also, the company said last month that it's getting out of the reverse mortgage business so it can focus more on its main mortagage operations. "We made the strategic decision to exit the reverse business due to competing demands and priorities that require investments and resources be focused on other key areas of our business," said Doug Jones, consumer sales and institutional mortgage services executive for Bank of America Home Loans. 

Early in March, Bank of America Corp. Chief Executive Officer Brian Moynihan said he believes the bank has the ability to earn between $35 billion and $40 billion a year in pre-tax earnings when the business normalizes. He also said that the bank has no intentions of making any more acquisitions and will instead look to cut costs and focus on its customers.  He also said the bank is focused on slashing costs, not only those from combining its previous mergers but those on its actual businesses. He said the bank was targeting an efficiency ratio, which measures costs as compared to revenue, of 55%. He said the bank expects to get to normalized earnings by focusing on strategy. By business line, he said the bank’s deposit business would be normalized by 2013 while wealth management would be between 2011 and 2013. Card services would take until 2012 or 2013 while home loans would take the longest, likely 2014 or later. On the firm’s business dealing side, its commercial, corporate and investment banks should normalize in 2012 or 2013, he said. Moynihan also said instead the bank was focused on returning “every dollar” in capital to shareholders, through regular dividends, share buybacks and special cash dividends. He said in the year 2013 to 2014 and beyond the bank could be paying out $12 billion in regular dividends and be left with $30 billion more to spend on buybacks and special payouts.

However, company has been struggling to win back the confidence of shareholders.  Bank of America has been battered more than any of the largest U.S. banks by investors' fears over its exposure to legal challenges and troubled loans in its residential portfolio.

Recently, the Federal Reserve rejected Bank of America Corp.'s plan for a "modest increase" in its dividend in the second half of 2011. The Fed told the bank that it could submit a revised capital plan. Bank of America said it will ask permission for a “modest increase” in its common dividend for the second half of 2011 as part of this revised plan.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 7.26 and PEG Ratio (5 yr expected) of 1.28. In terms of stock performance, Bank of America shares are down nearly 26 percent over the past year.

Full Disclosure: None.

Stocks In Focus: BAC, XOMA, SIRI

Shares of Bank of America Corp (NYSE: BAC) dropped as much as 2% in Wednesday's pre-market trading after the company said that it needs to revise its plans to boost dividends in the second half of 2011 after regulators objected to the proposal. The bank said that it will continue to work with the Fed and plans to "seek permission for a modest increase in its common dividend for the second half of 2011, through the submission of a revised comprehensive capital plan."

After Tuesday's closing bell, XOMA Ltd. (NASDAQ: XOMA) announced that its Phase 2b trial of XOMA 052 in Type 2 diabetes patients did not achieve the primary endpoint of reduction in glycosylated hemoglobin, or HbA1c, after six monthly treatments with XOMA 052 compared to placebo. Shares of the company slumped more than 34% in Wednesday's pre-market trading.

Howard Stern on Tuesday sued Sirius XM Radio (NASDAQ: SIRI), alleging that the satellite-radio station failed to pay performance-based stock options. The suit, filed in New York State Supreme Court, alleges that Stern was entitled to stock grants based on subscriber levels for 2008 and 2009, but that they weren’t paid. 

Full Disclosure: None.

Bank of America Corp. (NYSE: BAC): Q4 Earnings Preview 2010

Bank of America Corp. (NYSE: BAC), the largest US bank by assets, is scheduled to release its fourth-quarter earnings before the opening bell on Friday, January 21, 2011. Analysts, on average, expect the company to report earnings of 15 cents per share on revenue of $25.46 billion. In the year ago period, the company posted a loss of 60 cents cents per share on revenue of $25.08 billion.

Bank of America Corporation, a financial holding company, provides a range of banking and nonbanking financial services and products in the United States and internationally. The bank is greatly exposed to consumers with large residential mortgage, home equity, credit card, and consumer loan balances. Its commercial loan book is also large and depends on an improving economy. Bank of America’s acquisition of Merrill Lynch has also made it a significant player in the investment banking world.

In the preceding first quarter, the Charlotte, North Carolina-based bank's net loss was $7.3 billion, or 77 cents per share, compared with a loss of $2.2 billion, or 26 cents a share, in the year-ago quarter. Excluding  the non-cash goodwill charge, net income was $3.1 billion, or 27 cents per share. Revenue, net of interest expense, climbed to $26.7 billion from $26.035 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 16 cents per share on revenue of $27.15 billion. The company benefited from lower credit costs, higher net interest income due in part to the adoption of new consolidation guidance, and increases in other income, mortgage banking income and card income. 

Industry experts have been cautiously optimistic in recent days, predicting that Bank of America and the nation’s other largest banks will exceed earlier expectations. The overall improved outlook, in part, stems from improvements in lending. Continued improvement in employment and the housing market has also added to the positive tone. 

The company has taken several steps to improve its capital cushion and positioned itself for profitability. BAC's loan to deposits ratio has significantly reduced over the past 3 years (to less than 1:1) and loan loss reserves are at their highest level (close to 3.8%). Meanwhile, the large U.S. banks will have to undergo another round of stress tests securing approval from the Federal Reserve to increase their dividends or buy back shares. In fact, all 19 banks that were subject to the stress tests in 2009 had submitted their capital plan to the Fed last week. All the 19 banks, including big names such as JPMorgan, Bank of America Corp. (NYSE: BAC), Wells Fargo & Company (NYSE: WFC) and Goldman Sachs Group Inc. (NYSE: GS) will have to demonstrate that they have adequate capital to address potential losses over the next two years under various scenarios. These are mainly a precautionary measure amid economic recovery.

Recently, Bank of America reached a settlement with Fannie Mae and Freddie Mac of outstanding repurchase claims arising from certain home loans sold to them by Countrywide Financial Corp.. The $2.8 billion settlement helped conclude a significant portion of BofA’s government-sponsored enterprises’ put-back claims.As a result of the settlement, Bank of America said its home loans and insurance business is expected to record a $2 billion, non-cash goodwill impairment that the company can’t deduct for tax purposes. It also expects to take a provision of about $3 billion related to repurchase obligations for residential mortgage loans sold by Bank of America affiliates directly to Freddie and Fannie. The charge will have no impact on its Tier 1 capital ratio or tangible equity ratios.

The bank has also been discussing similar settlement with a group led by bond giant Pimco, the Federal Reserve Bank of New York and BlackRocks, who are trying to force Bank of America to buy back soured loans.

Wikileaks, an organization that has been discussed perhaps more than any other in recent months, had disclosed a few months ago that its next target would not be the US or even another foreign government but rather a public company. Founder Julien Assange even made public that the target was a big US bank and that the information was important enough to collapse the entire bank. There has been widespread speculation, drawing on earlier comments made by Assange, that Bank of America is Assange's target. Although the WikiLeaks report may be another black eye to Bank of America’s reputation, it is not expected to do much to materially change the earnings capability of BofA

In terms of stock performance, Bank of America shares are down nearly 10 percent over the past year.

Full Disclosure: None.

Bank of America Corp. (NYSE: BAC): Q1 Earnings Preview 2010

Bank of America Corp., the biggest US lender, is scheduled to release Q12010 earnings before the opening bell on Friday, April 16, 2010. Analysts, on average, are looking for earnings of $0.08 per share in the first quarter with estimates ranging from a loss of 3 cents to a profit of 15 cents. Revenues for the quarter are estimated to be $27.63 billion. In the Q12009, Bank of America reported net income of $0.44 per share.

Bank of America Corporation, a financial holding company, provides a range of banking and nonbanking financial services and products in the United States and internationally.

In the preceding Q42009, the Charlotte, North Carolina-based bank posted wider loss of $5.2 billion, or 60 cents a share, from a loss of $2.4 billion, or 48 cents a share in the year-ago period. Revenue for the three months ended Dec. 31 rose to $25.1 billion from $15.7 billion. Breaking out $4 billion of accelerated accretion from redemption of preferred stock issued to the U.S. Treasury and other items, Bank of America lost $194 million in the fourth quarter, compared to a loss of $1.8 billion in the year-ago period. Analysts, on average, expected a loss of $0.52 per share on revenue of $26.84 billion.

The latest news concerning Bank of America’s mortgage business says the company is seeking to forgive up to 30% of principal to homeowners who owe over 120% of the value of their home. Investors took the news as a positive sign, because it could help BAC avoid even more foreclosures as wonky ‘homeowners’ have taken to the custom of ‘walking away’ from any mortgages where they don’t stand to gain a decent return.

Meanwhile, investors will be looking to upcoming conference call for further clues on what contribution Merrill Lynch is making.

Last month, Bank of America announced that starting this summer it will eliminate overdraft fees on debit-card transactions by only authorizing transactions if a customer has enough cash in the account to cover the purchase. that could cost the bank tens of millions a year in revenue and put pressure on other banks to do the same. The company executives would detail the revenue hit they expect to take from the new policy when the company reports first-quarter earnings.

Among other developments, the bank plans to seek approval from China to expand its operations in the fast-growing country, to grow profits. The company entered China in 2004 with a branch in Shanghai and has since received approval to handle limited forms of lending and investment banking. Bank of America also holds a minority stake in China Construction Bank Corp., the second-largest bank in China.

In terms of stock performance, Bank of America shares have gained nearly 20 percent since the beginning of the year.

Full Disclosure: None.

Wells Fargo & Co. (NYSE: WFC): Q4 Earnings Preview 2009

Wells Fargo & Company (NYSE: WFC), the nation's fourth-largest bank, is scheduled to release financial results for the fourth quarter before the market open on Wednesday, January 20, 2010. Analysts, on average, expect the company to report net loss of 2 cents per share on revenue of $21.92 billion. In the year ago quarter, the company reported a loss of 79 cents per share on revenue of $9.82 billion.

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The company operates through three segments: Community Banking, Wholesale Banking, and Wells Fargo Financial.

In October, the financial services provider posted higher profit for the third quarter, thanks to its Wachovia acquistion that more than doubled revenues. The San Francisco, California-based company's net income applicable to common stock was $2.64 billion, compared to $1.64 billion in the prior-year quarter. On a per share basis, earnings grew 14% to $0.56 from $0.49 in the year-earlier period. Quarterly revenue totaled $22.5 billion, up from the previous year's revenue of $10.4 billion. Analysts, on average, expected the company to report earnings of $0.33 per share on revenue of $21.63 billion.

Provision for credit loss during the quarter increased to $6.11 billion from $2.49 billion reported in the comparable quarter of the previous year. Third quarter net loan charge-offs were $5.1 billion, compared to $1.9 billion in the corresponding quarter of the previous year. The allowance for credit losses, including the reserve for unfunded commitments, totaled $24.5 billion, higher than the previous year's allowance for credit losses of $8.03 billion.

The company expects credit costs to remain elevated in the fourth quarter, given the continuing economic challenges. However, based on portfolio trends and its current economic outlook, and assuming no unexpected further deterioration in the economy, the company believes consumer loan losses will peak in the first half of 2010 then gradually decline, while commercial and commercial real estate loan losses will peak in the second half of 2010 and then gradually decline. Further, Wells Fargo expects nonperforming assets or NPAs to continue to increase in the near term, but at a slower pace as credit deterioration slows. NPAs are expected to remain elevated through 2010.

Late in December, Wells Fargo & Co. (NYSE: WFC) repaid the $25 billion it received from the government in bailout money. The company sold 489.9 million shares of common stock at $25.00 per share for a total of $12.25 billion in a common stock offering completed December 18. Net proceeds of this common stock offering and excess liquidity were used to repay the $25 billion TARP investment and accrued dividends. The company said that, by repaying the TARP investment, it will eliminate $1.25 billion in future annual preferred stock dividends.

Wells Fargo's Tier 1 Common ratio, a key measure of financial strength, is 6.2% after TARP repayment and analysts believe it will continue to rise next year. However, Wells' Tier 1 ratio is below that of the other banks that have exited TARP. The Tier 1 ratio of Bank of America (NYSE: BAC) and Citigroup (NYSE: C) after TARP repayment stand at 8.5% and 9%, respectively. By fourth quarter 2010, Bernstein analyst John McDonald believes Wells Fargo will have a Tier 1 Common ratio of 7.9%, compared to Citi at 8.7% and Bank of America at 9.2%.

Although the share issuance will likely dilute earnings per share, experts believe that the step is mildly positive for the stock. In the immediate term, the TARP repayment will reduce the fourth-quarter earnings by $2 billion due one-time hit the bank will incur from repurchasing TARP preferred stock. Offsetting those concerns, however, analysts said their worries over Wells Fargo's balance sheet, TARP-related government interference into the business, and the size of its TARP repayment have been eased.

Among other developments, Wells Fargo said in December that it has agreed to buy Prudential Financial Inc.'s (NYSE: PRU) minority stake in their retail brokerage joint venture for $4.5 billion in cash.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 26.71 and PEG ratio (5 yr expected) of 1.39. In terms of stock performance, Wells Fargo shares have gained nearly 21% since the beginning of the year.

Full Disclosure: None

Bank of America Corporation (NYSE: BAC): Q4 Earnings Preview 2009

Bank of America Corporation (NYSE: BAC), the biggest US lender, is scheduled to release financial results for fourth quarter before the opening bell on Wednesday, January 20, 2010.. Analysts, on average, expect the company to report net loss of 51 cents a share on revenue of $27.19 billion. In the year ago quarter, the company reported a loss of 48 cents per share on revenue of $15.68 billion.

Bank of America Corporation, a financial holding company, provides a range of banking and nonbanking financial services and products in the United States and internationally.

There's no doubt that 2009 was a rough year for the banking giant. In October, the Charlotte, North Carolina-based bank reported that it swung to third-quarter net loss of $1.00 billion, compared to net income of $1.18 billion in the same quarter last year. Net loss applicable to common shareholders for the quarter was $.24 billion compared to net income of $704 million in the year-ago quarter. On a per-share basis, net loss was $0.26 compared to net earnings of $0.15 last year. The bank's total revenue, net of interest expense on a fully taxable-equivalent basis, rose 32% to $26.4 billion from $19.9 billion a year ago. Analysts, on average, expected the company to report a loss of $0.21 per share on revenue of $27.61 billion for the quarter.

The provision for credit losses was $11.7 billion at the end of the third quarter, compared to $6.45 billion a year ago. During a conference call with analysts, CEO Lewis said that although loan losses are expected to peak this year, they "will continue to remain high going into 2010" and additions to the loan-loss reserves "will likely continue at least through the fourth quarter."

The bank said that despite the loss in the period, it strengthened its reserves, capital position and liquidity through efficient balance sheet and capital management.

In December, the firm it repaid the U.S. Treasury a $45 billion it received from the government as part of the Troubled Asset Relief Program or TARP. Earlier, the company commenced an offer to sell 1.286 billion common equivalent securities that generated gross proceeds of around $19.29 billion. The offering was priced at $15.00 per common equivalent security and its proceeds, along with existing corporate funds, were used to repurchase all the preferred stock issued to the U.S. Department of the Treasury. The company also paid the government $190 million in accrued dividends on the repurchased preferred securities.

Recent capital actions, including asset sales and capital raising, is likely to strengthen its balance sheet even further.After the TARP repayment and these initiatives, the company's Tier 1 capital ratio would be 11.0%, pro forma based on the September 30, 2009 ratio of 12.5%. The Tier 1 common capital ratio would be 8.4%, pro forma based on the September 30, 2009 ratio of 7.3%.

Bank of America's exit from TARP also freed it of compensation restrictions the government imposed amid outcry over pay at banks. In order to retain top talent as well as mid level employees, the bank has decided to pay competitive bonuses. Early this month, A report published in the Wall Street Journal suggested that Bank of America Corp. investment bankers may get bonuses that are close to 2007 levels as the bank.

Last month, the bank named Brian Moynihan, head of the bank's consumer and small-business units, as chief executive officer and president of the company. He replaced Kenneth Lewis, who recently announced that he will retire from the company after a 40-year career on December 31, 2009.

The upcoming quarterly report is expected to reflect the strength of its investment banking division. Fees from Bank of America’s investment bank and capital markets businesses ranked second in 2009 among Wall Street firms, behind only New York-based JPMorgan Chase (NYSE: JPM). Early this month, CEO Moynihan said that the fees reflected the success of the Merrill Lynch takeover. However, despite several positive signs, the bank still faces a number of challenges, including coping with the sluggish economy and reining in credit losses. Moynihan has already said that the key to profitability for Bank of America will be clearing the "credit hurdle."

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 20.38. In terms of stock performance, Bank of America shares have gained 25 percent over the past year.

Full Disclosure: None