The Banking and Strategy Initiative

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Bank Results Season: BofA turns in an all round excellence score

My Mortgage Docs to be Reviewed by an Expert

Net profits of $2.6 B on just $1.7 B in Loan losses before taxes led the most heavily capitalised bank in the orld to further improve its net Basel 3 Tier I Common ration to 9.42%. Basel 3 weighted assets were reported by the bank to have already been reduced from over $1.56 T to $1.38 T as sloughing off of legacy assets continue to reduce retail loan books shored up by an improved ramp up in Commercial loans and leases. Net interest income was stable at $10.6 B with NIMs a poor 2.36% in line with the bank’s historical performance using Fed sources. Improved trading on mortgages also allowed the investment bank to turn in $3,3 B in FICC revenues and $1 billion in quities trading revenue a big improvement for the bank adding to its Americas revenues of $1.25 B in investment Banking and international income of over $200 mln helped to $1.01 B in debt underwriting income.

FTE servicing legacy assets were down by 6k on year and over 3k on the December score itself to just over 35k, ostly a hangover from its Countrywide aquisition,

Global Wealth Management business fully integrating high end US Trust and Merrill Lynch businesses scored another $2.8 B in Fee income for a pre ta margin of near 26% and a $720 m bottomline a 6X improvement over Q1 2012. Overall bank deposits grew back to over a $1 T with the balance sheet stable at $2.18T. More than half of the deposits are retail The bank also juggled assets frm the Wealth management business. Similarily Commercial mortgage lending is recognised alongwith the investment bank in the Global Banking business

Consumer Banking added up $2.4 B in fees and charges with $4.8 B in Credit Card, personal unsecured, Mortgages and Auto loans . Segmental efficiency ratios were not evident from the banks reporting but would likely compete for adverse attention with UBS performance in Europe at above 60% with $4.1 B in Consumer Banking, $3.2 B in Wealth and $18 B bank wide on revenues of $23.7B

Less than $1 B was realised from Project new BAC savings and litigation costs limited to $0.9B in the quarter. Incentive compensation increased by $800 mln for the bank in the quarter across wealth and investment banking businesses. Asset quality improvements further halved the charge offs to 1.14%, bringing Net charge offs lower by $600 MM and NPAs were down $700 MM

Bank continues to claim improved per card spend in the credit card portfolio but loan balances were not available . Home loan business share for the bank has improved to just under 5% increasing first mortgagess to $23.9 B in the quarter but production revenue dipped 20% to just $800 MM

The 20 cents per share performance from the bank is obviously still showing signs of duress and the bank should probably look for more free cash to get rid of the flab and get the tangible Book value up from $13 to nearer $30 as soon as it is possible for it to be taken seriously again as it already competes in most segments with regional banks like US Bancorp, pacific trust, and even Comerica and M&T/Key Bank despite the nineties and oughts spends on M&A from Fidelity to Merrill Lynch

However the bank’s $23.8 B new stock of originations has a smaller percentage of Government sponsored refinancing across MHA and HARP at just 50% and as its large distribution network across almost 6000 banking centers manages to charge persistent fee basis from consumers its clientele may be better placed to assure the bank of business when better days indeed come


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