BAC = Big Accounting Chargeoffs
Bank of America earnings last Friday wrapped up the big bank earnings reports. BAC was the only one of the big four to report a loss for both the last quarter and 2010. BAC would have posted gains except for goodwill impairment charges.
Goodwill impairment? Who is Will, and if he's good, why is he impairing Bank of America's earnings? In this article, I continued pulling the thread on banks with a quick look at BAC.
Bottom line? BAC's valuation looks attractive, but it isn't trading at much, if any, discount to its peers. And I think it has more risk from mortgage putbacks and continued write downs than the other big banks. After all, they didn't buy Countrywide. BAC might do just fine, but I think any of the other big four would be a better investment.
Sidebar: The $2 billion Q4 impairment charge was in the Home Loans and Insurance segment. The earnings report doesn't say, but a reasonable guess would be the charge is related to the 2008 Countrywide acquisition. Nearly all of the $3 billion settlement with Fannie and Freddie is related to Countrywide loans. BAC acquired Countrywide about three years ago in a stock transaction then valued at about $4 billion. If the speculation is correct, that $4 billion acquisition generated nearly $5 billion in charges in just one quarter.