In addition, the bonds are considered more liquid than the straight mortgages, so BAC not only gets a better capital ratio, but can also count them toward the higher liquidity rules that the Feds are implementing.
What it means is that BAC is packaging some of the mortgages it was holding on its books and selling them as bonds guaranteed by Fannie and Freddie. According to Fed rules, banks must keep capital on 50% of mortgages held, but only on 20% if they hold bonds guaranteed by Fannie and Freddie and 0% for bonds guaranteed by Ginnie. Basically, by repackaging they can keep the assets but keep less capital against those same assets.
Agreed. I wouldn't expect to see $20 this year. It won't be until Q4 earnings that we should begin to see a clearer picture of what BAC's financials look like without all the expensive settlements. I think we could end the year in the $18 - $18.50 range unless, of course, they provide some exceptional surprises in Q3 earnings. Next year will see this go above $20.
Another one that's been dipping a little to heavy into the pixie dust. Welcome to ignore Tinker Bell.
If it does anything like it has in the past, it will work its way up to about $17.50 fairly rapidly, then settle in for a stretch of time while posters here get frustrated and complain endlessly about how the stock doesn't do anything, then it will begin its next move up, settle in, and repeat cycle.
In addition, for the loans on the books that have fixed interest rates, the value of those loans goes down as rates rise so banks will take a hit on asset values.
Rising rates are NOT the panacea for banks that so many here seem to think they are. Widening interest margins are NOT guaranteed. Remember, even though banks can raise rates they charge, they will also be paying more for funds they borrow and pay more in interest to depositors. The question is, which will rise higher, the rates banks charge or the rates banks have to pay.
BAC is focusing on its core customers. Since they are in 50% of all American households, that gives them an adequately large pool to work with. For example, a recent report stated it cost $250 to sell a card to a new customer but only $35 to an existing customer. They learned from Well's example that you can get more profit faster by working to get your existing customers to have more products. They are also putting more focus on the mass affluent customers, realigning their banking centers, etc. They have been very busy while everyone's attention was focused on the big news settlement issues.
Yes, it's true. It was a gala function for a new Middle Easter Christian group and he got booed and jeered when he started talking about Israel being the Christian's best friend.
There are more conspiracy theories than a camel has fleas or, if you prefer, this message board has basher/shorts, not that there's any difference.
The issue, at the moment, seems to be about the swaps. The value of the swaps Detroit had out was $345 million. BAC and UBS eventually settled for $85 million. However, this Syncora and I think Fidelity were the insurers which, of course, BAC and UBS are expecting to pay on their claims for their losses on the swaps. However, it appears Syncora is using the excuse that Detroit now says the original $1.4 billion loan in 2005 was illegal. If that argument holds, then it basically means Detroit would have to return the $1.4 billion it borrowed from investors because the whole deal was illegal on their part. Detroit made this mess and now they have to live with it but the media, and others, are painting the banks as the bad guys that are holding up a bankruptcy deal. We can only hope the judge will see through all that, but I'm not holding my breath.