Back to BAC
As you may recall - I can't find the blog post myself - two years ago, maybe a little more, I acquired a small position, what I think of as a 'half-stake', in both BAC and C, two bank stocks that had taken a colossal whooping during the subprime crisis. At the time WFC and JPM were trading at small premiums and I decided that, BAC and C being too big to fail, and being valued lower than other issues that were also too big to fail, I'd take a flyer and wait for banks to reach parity again when the economy took off.
I stated publically that I would not sell these positions until Jan 2013, no matter what happened. At the time I was expecting (guessing) Bernanke to begin raising rates in November 2011 following a housing-driven recovery of the broad economy; and I was expecting GDP growth and monetary inflation to pick up in 2012.
Well, none of those theses came true. What did happen: both stocks began issuing a tiny dividend. BAC got hit with a $6b or so fine for originating mortgages improperly, which was a kick in the teeth but better than most analysts were expecting, as their ongoing liability for this appears to have been erased. Shareholder equity is still nil and the companies are still having trouble executing in this low rate environment. JPM and WFC have both significantly outperformed and I certainly regret not including them in my basket of distressed bank stocks, as nearly every commentor told me I ought to.
However, stock prices of B and C, which at their nadir were 52% below my entry point, have rebounded, coming to around 11-14% off my entry point in the past couple of weeks. And there has been a significant housing recovery, such that my stake in ITB (a housing-oriented sector ETF), held over the same time period, has pulled a one bagger.
Chase's reputation for abysmal customer service is legendary - I am one of its victims, will never bank with them again - but I don't hear much better about BAC or C. I bank with Wells, myself, and they take decent care of me.(although I thought it was odd they wouldn't originate my home loan, but bought it about a month after someone else originated it.) I hear bad-to-OK things about C's customer service and the last time I walked into a BAC to try to open an account I walked out without being helped after speaking to two tellers and a new accounts officer, none of whom appeared to understand English.
I think the outlook for retail banking remains bleak, but I am not inclined to sell my shares here because I think things are getting marginally less bleak and I still believe an unexpected rate hike - it will have to be unexpected - looms on the horizon. The one step I am considering is adding some WFC to this basket.
Your thoughts, my Foolish™ gentle readers?