$17.25
0.14 (+0.82%)
Bank of America Corp (NYSE:BAC)
CAPS Rating:
The Company through its subsidiaries, provide banking & nonbanking financial services and products through three business segments: Global Consumer and Small Business Banking, Global Corporate & Investment Banking & Global Wealth & Investment Management.
RSS Headlines
Fool UK
Recs
Bank of America (BAC) is down nearly 31% from its 52-week high. This is due to sub prime mortgages. Bank of America, however, focuses on personal banking and does not have much in the way of sub prime exposure. It is true that more write-downs are coming, and this willimpact the bottom line, but a 31% drop is simply Wall Street panicking (what’s new?).
Not sure I follow you. You say BAC is insulated from the sub-prime mess, and that the drop is mostly panic-driven, so how does this translate into an underperform rating?
Yes I also agree, wouldn't that put the price at a great discount if they are being unfairly blamed?
Watch their derivative exposure.
I started taking a real position in BAC, but when I buy stocks I generally buy them as a 5 year at least hold investment. I want to make BAC one of my long term core holdings. It still needs to take another hit or two since the housing "crisis" is nowhere near its bottom. As a real estate attorney who experienced the 80's crash, I can tell you that foreclosures do not end over night. Many take years from start to finish. We are not at a bottom or close to one. This will continue through the year and hopefully by 2010 things should start stabilizing. Hopefully. But if the Fed starts raising interest rates then it will take longer.The Countrywide purchase has me concerned, however. I have read that BAC may not be backing Countrywide's holdings; that the deal will basically be their buying the name and sales force but bundling Countrywide's holdings in another separate holding company which would then possibly wind up in bankruptcy. If this is how it plays out then that would be a GOOD thing for BAC. But if BAC plans on taking over the whole kit and kaboodle, then BAC's CEO needs to be fired because BAC would be paying a hell of alot more than 4 billion because of the definite inevitable writedowns.While the market was hot, you often saw double loan deals. The primary lender gave 80 pct while the secondary lender gave 20 pct. (an extra 6pct was often given to cover closing costs). What is happening now is that many banks will work out "short" sales. But these short sales have been, SO FAR (depending on location), coming in at 20 pct below original purchase prices. End result the primary walks out with all the money, the secondary usually gets a token $1k since it is better than getting nothing while continuing to pay for that nothing. In essence the secondary lender (the equity credit lines) have been losing basically 100 pct of their value.The biggest losers then are the credit line lenders (Citibank was a big time player in this area). I don't know how deep BAC or Countrywide went into the credit line business. I would like to know, as an investor, but that isn't happening.So I gamble. I gamble that BAC will do the smart thing with Countrywide, that BAC's exposure in credit line lending isn't terribly high, that they will be able to maintain the dividend, or at least not cut it hard, and that the housing market will stabilize at least by 2010. Assuming all these things then BAC in 5 years might turn out to have been a great buy now.
>Bank of America, however, focuses on personal banking and does not >have much in the way of sub prime exposure.This statement is just wrong. Irretrievably, irrevocably, insanely wrong. And then BAC bought countrywide.scott
i think scott is correctI thought BAC didn't orginate or even hold (that many) of mortgages at all... it was my impression that they bought CFC for cheap access to that credit market... so it is my belief (not fact) still that BAC should not be affected as much or at all by the credit chaos. don't get me wrong... not everything is peachy, but i thought they had little to worry about.with CFC thou its different, i'm a complete bear on bac... i think cfc will just rob them, and there price will suffer some more in the coming quarters.I don't like to look at banks balance sheets because they can really be a headache... but if someone can shed some light on it... it would be much appropriated.
Keep in mind that BAC did not buy ALL of CFC. It cherry-picked the dept with the most upside at a bargain basement price, after the subprime mortgages of CFC had been vetted. That purchase has now brought BAC share price down - at a time when BAC was already undervalued.