The Banking and Strategy Initiative

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Bank Earnings Season 2014: Bank of America, finally an also ran, Merrill Lynch too!

Just to discover ofcourse that we do not cover the banks outside the Big 4 and took close decisions to drop Morgan Stanley earlier and are yet a little on the edge about America’s heritage bank. However the analysis of 2014 results that follows is on the Lincoln Button and we should probably stay away from banks of this size that continue investing in America’s Domestic market as they continue being beaten for domestic business by PNC Financial Services, USB and others that report their yearly results next week. That Bank of America is yet to really deliver on fresh initiatives in Europe, EMEA and elsewhere in Asia is a given before we summarise Q4 and decide if we will be following them every quarter here on or not.

On the other side, the contingent capital specialists and TLAC fed Swiss Banks have their regulator jumping out in front of the Euro at long last and we do not see yields stopping to drop at the 10 year rate before hitting 1.5% or lower.

Not surprisingly, the Bank of America earnings mirror Wells Fargo which also has a similar spread down to geographic dotting of branches on the national map, with Net Interest income at $9.9 Bln in the quarter, touched gracefully by a substantive fee income parcel of $9.1 Bln. The year’s score in fact shows up NII at $39.95 Bln and fee and charges at a cushy $44Bln down from 2013 on both counts by more than 5% from the full year 2013 data. Fortunately the NA business here too continues to give greater rewards in dwindling loan losses after everyone else has burned the stick adding $1.1 Bln to the bottomline

This time the Countrywide legacy hit them in the First and third quarters and they ended the year halving their profits almost pooh poohing losses on Forex market manipulation charges, and ending 10 cents lower than expected at $0.36 cents in Earnings for the year, only $0.25 cents for Q4 not beating expectations and still paying out on Currency manipulation tricks in 2015 and not counting out legal losses beyond the $67 Bln at the DoJ/FHA settlement that saw the shares beating their tangible book value on the Bourses in 2013 and this year

Share Capital base has increased in Common equity again as the bank continues shoring up Tier I capital the ugly way, out of RWA exits still on the calculator at JP Morgan and even US Bank and smaller counterparts. Numbers of employed citizens have dropped another 10% at the bank in accelerated rationalisation with a network of 4800 branches at the end of 2014

Wealth services accounted for $13 Bln in Fee Income of the $44 Bln while Trading and Investment Banking headed $6 Bln apiece and personnel expenses despite the nominal reduction in staff were cents away from the $34.7 Bln charge at $33.8 Bln. However any increase in operating expenses was obviously in legal charges alone and the bank is still attempting a labyrinthian recovery though one can see it started wrong and like Alice and the rabbit, it is going to be up to fairy tales to discover them coming out of the maze anywhere.

The Earnings call takes up in an hour from now while Citi reports (comparably in the home NA markets) at 11 AM ET

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This entry was posted on January 15, 2015 by in Uncategorized.

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