I've gone through the financials and done my own analysis. Let's see others do the same.
BAC wrote-down (not wrote-off) $6B in Q1, CFC wrote-down $1.5B - total $7.5B
I'm estimating a write-down of $3.8B this quarter and the next and then it's done. $7.6B left to go for both companies combined. That's all the write-downs they will need. The write-offs may or may not get to the level, and if they don't it will accelerate the stock's recovery in 2009.
What say the rest of your brainiacs.
The real question for BAC is the lingering lawsuits from the Countrywide deal. Two states have started the process and all 50 will soon be looking for a settlement. After several years BAC will likely pay the extortionist with the hopes that the problems will go away. Now, let the fed raise interest rates to protest the dollar and this purchase starts to smell like a skunk.
I agree with your analysis on the American people, but when it come to housing and the banking sector, these are bad times. When it come to the the Countrywide deal, this could be the worst time ever for BAC. In fact, it could take the bank down!
My, my what an incoherent tirade.
First of all, I was responding to the orignial post entitled "shut up and give me numbers."
It's no game, as you suggest. I see benefits in taking a more quantitative approach to BAC by laying out the line items of BAC's financial statements on a spreadsheet and trying to make rational asumptions on current and historical trends.
Incidentally, on the HELOCs, they are especially signifcant to BAC. They represent 21% of there consumer loans and 13% of total loans. Charge offs in the first quarter were $40 Q1 charge offs were $496 million, up $487 million Y-o-Y. Charge offs jumped from .08% to 1.7% of average home equity loans. So historical levels don't mean much do they?
Sorry, I will continue to exchange thoughts with those I respect. Ad hominims are a lazy response. Better yet, if you don't like it, use your ignore key.
the comparison to 2000 fails to consider that the losses suffered in 2000 were real losses as opposed to paper write downs of the value of otherwise performing loans due to lack of marketability. What is quickly written down in a period of panic can be as quickiy written up as the panic subsides. Even if the panic doesn't subside the income from performing, previously written down loans will artificially inflate income and equity as principal payments are made. Paper losses have a benefit to cash flow via tax savings which was not around in 2000. While the banks look broke on paper they aren't.
You have made a great point. BAC still earns interest on the approx. $15B of write-downs until they actually become write-offs. Now, $15B on $860B is not a huge amount, but if those loans are in the 6% range then thats $900M per year (close to a B).
Do your writedowns factor in 30%+ default rates on mortgages and credit cards?
Let's talk mortgages for a sec:
Roughly one month ago it was acknowledged that 30% of America now OWES on the mortgage more than their house is worth. CONSERVATIVE estimates are that real estate prices will fall another 30% from where they are NOW.
The average american will owe $300K on a house worth $150K MAX. The smart ones will walk away, leaving the bank STUCK.
Now let's talk credit cards:
Borrowed money is still the lynch pin propping up consumer spending, and it is drying up fast. Once the Rodriguezes of the world realize they are maxed out, the minimum payments will STOP COMING IN and they will default in DROVES.
Meanwhile the almighty US dollar will lose another 20% MINIMUM of its value EVERY YEAR until the idiots at the FED stop TALKING THE TALK and start WALKING THE WALK. And oil will double every 2 to 4 years. The only way to stop it is to RAISE INTEREST RATES, and do you really think those ball-less sacs at the FED are going to do that when the federal government is the universe' #1 debtor?
In other words, holding a US STOCK is STUPID, as your dollars are worth less and less every day. DO YOU GET IT?
Try holding GOLD, SILVER and Norwegian krones and you will be just FINE.
Housing prices falling ANOTHER 30%...don't think so. Even in the Great Depression they fell 30% TOTAL. You're talking a total of 55% or so in today's market...ain't gonna happen.
While gold and silver may "appear" better investments, I'd like to see a lender take it in exchange for a car or a house.
If things get as bad as you're implying, NOTHING you own will matter except a large garden, a paid off house, a car, and a couple of guns to guard it with.
You probably want to invest in rental property. Because after people default on their $300k house who is going to lend them money on a $150k house? I hear they are more sympathetic if bankruptcy is the reason for default, but if you stiff one mortgage company haven't you stiffed them all?
I think homes in overheated areas are losing a lot of value, but of course, they were over-valued to begin with. If you have a place to stay, and you are OK with the monthly mortgage payment (or rental) then why default.
If you bought more than you could really afford and used an ARM to finance it then take your medicine. You bought more than you could afford. Give it back to the bank and suffer the consequences of your risky adventure.
I'm thinking that about 6% of the recent mortgages fall in this category, and those that are going to default will default this year. Next year will see a return to more normal dafault rates that are correlated more closely with unemployment - people who lose their jobs and then can't afford their home.
Finally, there are still something 500k housing transactions ocurring per month for existing homes and another 90k or so for new homes. Although this is not a vibrant market by historical standards it is still a lot of transactions and BAC will be number one in this market by a wide margin (something like 1.5 times the second largest originator which would be Wells Fargo).
I disagree with your statement. Personally I think the SMART ONES never signed up for interest only loans or overpaid that much for their house in the first place. And I don't believe that 30% figure either. Maybe 30% of the people who bought in the last 5 years and financed 120% at interest only adjustable rates do. But not the Smart Ones. And lastly let the dumbasses walk away, they can rent one of mine.