Nomura's Schorr Said BofA's (BAC) Q3 Was "Not Great" But There Were Some Positives
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Up: 7 | Down: 12 | New: 19
Rating Summary:
26 Buy, 18 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 7 | Down: 12 | New: 19
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Nomura's bank analyst Glenn Schorr issued some quick comments following Bank of America (NYSE: BAC) Q3 results announced this morning.
Schorr notes while there were many moving parts "we think an operating number was somewhere in the range of consensus (and as uninspiring as most big banks will be this quarter)."
He said while there were some positive trends like deposit growth, tame expenses, still-improving credit quality, lower RWAs/higher capital and liquidity, and a higher tangible book value, disappointments include brutal trading results, stable but high rep and warrantee claims, 3.7% higher share count, and an 18bp lower NIM.
"All in, no one is likely to show impressive earning power this quarter, but building
capital is key for BAC, even though its tail risks have not abated," Schorr commented.
Positive in the Quarter according Schorr:
1) Deposits +8% y/y, +1% q/q; 2) TBV +4.5% q/q to $13.22; 3) reserves / annualized NCOs 1.74x, highest in 15 quarters; 4) RWAs -$33bn q/q to $1.36 trillion; 5) B1 T1C +42bp to 8.65%; 6) time to required funding 27 months, up from 22 in 2Q; 7) LTD -$28bn q/q to $399bn, ST unsecured borrowing now $0 outside the bank; 8) $1.0bn release in cards; 9) US card NCO rate -101bp to 6.28%; 10) new US card accts +17% q/q, purchase volume +5% y/y, up modestly q/q; 11) expenses down q/q—more coming.
Issues in the Quarter according Schorr:
1) NIM -18 bps to 2.32%; 2) significant items: $4.5 FV adj on structured liabilities, $3.6 CCB gain, $1.7bn trading DVA gain, $2.2bn PE and strategic inv loss; 3) R&W liability -$1.5bn to $16.3bn; 4) GIIPS exposure $14.6bn ($3.5 sovereign); 5) IB (FICC -87% q/q ex DVA, Equity -31%, IB revs -36%); 6) $500mm litigation expense; 7) C&I loans flat q/q (CRE down $2.4bn); 8) new rep and warrantee claims still high; 9) share count up 3.7%.
He said while the stock is cheap at less than tangible book, Q3 results are likely to be viewed as unsustainable and mortgage tail risks remain. He is maintaining a Neutral rating and $8 price target pending the conference call.
For more ratings news on Bank of America click here and for the rating history of Bank of America click here.
Shares of Bank of America closed at $6.03 yesterday.
Schorr notes while there were many moving parts "we think an operating number was somewhere in the range of consensus (and as uninspiring as most big banks will be this quarter)."
He said while there were some positive trends like deposit growth, tame expenses, still-improving credit quality, lower RWAs/higher capital and liquidity, and a higher tangible book value, disappointments include brutal trading results, stable but high rep and warrantee claims, 3.7% higher share count, and an 18bp lower NIM.
"All in, no one is likely to show impressive earning power this quarter, but building
capital is key for BAC, even though its tail risks have not abated," Schorr commented.
Positive in the Quarter according Schorr:
1) Deposits +8% y/y, +1% q/q; 2) TBV +4.5% q/q to $13.22; 3) reserves / annualized NCOs 1.74x, highest in 15 quarters; 4) RWAs -$33bn q/q to $1.36 trillion; 5) B1 T1C +42bp to 8.65%; 6) time to required funding 27 months, up from 22 in 2Q; 7) LTD -$28bn q/q to $399bn, ST unsecured borrowing now $0 outside the bank; 8) $1.0bn release in cards; 9) US card NCO rate -101bp to 6.28%; 10) new US card accts +17% q/q, purchase volume +5% y/y, up modestly q/q; 11) expenses down q/q—more coming.
Issues in the Quarter according Schorr:
1) NIM -18 bps to 2.32%; 2) significant items: $4.5 FV adj on structured liabilities, $3.6 CCB gain, $1.7bn trading DVA gain, $2.2bn PE and strategic inv loss; 3) R&W liability -$1.5bn to $16.3bn; 4) GIIPS exposure $14.6bn ($3.5 sovereign); 5) IB (FICC -87% q/q ex DVA, Equity -31%, IB revs -36%); 6) $500mm litigation expense; 7) C&I loans flat q/q (CRE down $2.4bn); 8) new rep and warrantee claims still high; 9) share count up 3.7%.
He said while the stock is cheap at less than tangible book, Q3 results are likely to be viewed as unsustainable and mortgage tail risks remain. He is maintaining a Neutral rating and $8 price target pending the conference call.
For more ratings news on Bank of America click here and for the rating history of Bank of America click here.
Shares of Bank of America closed at $6.03 yesterday.
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