The Banking and Strategy Initiative

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Bank Earnings Season: Bank of America tries to do the impossible with its Housing portfolio? (Q4 and Full Year 2012)

Bank of America Plaza (Atlanta)

Bank of America Plaza (Atlanta) (Photo credit: Wikipedia)

Though the bank managed the hit from settlements well enough and the expected decine in charge offs together with ready provisioning enabled the bank to avoid losses on the last big writedown quarters, BofA still seems to be alking the precipice with on the edge Capital requirements at 11% by weak BaselI standards and while a detailed exposition of the internal models is not immediately avaiilable one also feels they might have been too sunny and optimistic about RWA allocaations and Capital classification as they project a 9.25% Basel 3 Tier I Common at 4Q2012 apparentl above the 8.5% requirement inclding the low G SIFI charge bank expects from the Fed in 2019. The bank wouls also not be hit by other G SIFI Capital guidelines as it as withdrawn from most of its international businesses in nearly $50 bln in assetysales till date but is right in being proud about getting a big share of the fresh mortgage origination at #3

The decline in charge offs this quarter comes as the bank crosses the era of high delinquency rates on its entire loan book  (as networks ‘warned’ it might) to under 2% (CNBC) and 30+ delinquencies down 26% . The Analyst meet starts in 90 minutes

BofA also as with the other twwwo retail franchises reported a big 7.4% jump in Deposits and NIMs kept creeping down on HAMP/HARP portfolio mortgages that made 2 out of every 3 mortgages ( more 3 out of 4) in this quarter again and BofA accounted for a lion’s share of that market its settlement costs alone reaching $5 B of which more than half was provisioned this quarter

The bank thus reported an income of $700 mln after provisions and Net Interest income crossed $10.6 bln . The balance sheet assets was just 7% lower  since the beginning of the year at $1.2 T while RWA assets decreased $100 bln oin a concerted effort by the bank with $64 bln in market risk alone (Basel 1)

Debt  has been reduced by nearly 25% to $276 bln and is indeed trending downwards substantially every quarter

Fee income is Consumer Banking at $2.5 bln is robust but almost half of the NII of $4.5 bln while Consumer Banking Operating expenses remain higher at $4.1 bln out of the total $7 bln in revenues despite the expecteed totted up savings of $8 bln from Project New BAC and other initiatives

The credit card delinquency ratio at the much in favor bank is still 2.9% more than twice JP Morgan’s credit card delinquency score but is a historic low and charge offsa re down to 4.2%m, with Average outstanding $108 bln Even at the wealth management franchise the bank continues to book both loans and fees and added back to Consumer banking overall Consumer NII rises to $6.2 bln and another $2.7 bln is added in fee income on these accounts

Investment Banking Fees is strong again at $1.6 bln as the US business is strong again at $1.3 bln but Debt brought in the Lion’s share above $1.08 bln

Global Banking and Markets revenues are close to $7 bln at the bank

Consumer NPAs have trended down from $27.8 Bln in December 2011 to $23.5 in December 2012

The share price  may finally cross Tangible book value at $13.30 this 2013 as housing continues to improve. Stress test results come out in a day or two from now.

 

 

 

 

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