Ok…purchase of CFC is not looking like the best move at this point, and IB profits will be considerably lower going forward if not at an outright loss for the next few quarters. BUT…does this truely warrant knocking off 36% ($86.5 billion) of market cap since October? Am I the only one seeing this as a $45-50 stock going forward? 7.5% dividend yield and about to become the nation’s largest mortgage lender??? Do people look to deep into Mrs. Whitney’s extremely pessimistic views?
it’s fallen in to my kill zone but i’m gun shy because of a potential dividend cut. around 1.1x p/b i think it’s good value long-term, but in this environment it could easily go materially lower and i’m only ok if i know i’m getting paid 7%+ to wait for it to come back. yields at these levels aren’t usually sustainable for financials. plus, they keep tapping the markets for capital, i’m feeling more and more a dividend cut is such low-hanging fruit they’re going to reach for it one of these days. the market will get pretty spooked if BAC cuts their div. . .
I think a few analyst are already saying BAC has to cut their dividend this year.
With WB and C cutting their’s, I’d say they don’t have a lot of reason to keep it there.
Would it still be likely that they cut their dividend after the 2.7 billion preferred offering?
BAC is sitting on $40 billion in cash as of the end of last quarter. Quarterly dividends cost about $2.9 billion. I don’t see the dividend going anywhere.
wyantjs Wrote: ------------------------------------------------------- > BAC is sitting on $40 billion in cash as of the > end of last quarter. Quarterly dividends cost > about $2.9 billion. I don’t see the dividend > going anywhere. That’s a pretty poor analysis. Bear Stearns had $17.4 billion in cash as of 12/31/07. WaMu had $10.1 billion as of 3/31/08 and went out and raised $7 billion eight days later. So many people continue to not understand why the banks are RAISING capital. I won’t complain, though, because I’ll continue to take their easy money.
Yeah, I think it has more to do with capital levels than cash on the balance sheet.
Poor analysis?? Bear Sterns had less than half that amount of cash, was the 5th largest IB with less than one tenth the market size of BAC, and had piss poor risk management from day one starting last summer. BAC is the largest (by some measures) with almost 2 trillion in assets. Ken Lewis is a consumer banker at heart. Inv. Banking revenues are a small part of BAC’s business compared to the consumer banking. Suffice it to say…if BSC debacle happens to BAC, this world will have much larger problems, and this conversation will be meaningless. Also “Yeah, I think it has more to do with capital levels than cash on the balance sheet.” Is cash not capital??? What better capital do you need than 40 billion in cash??
What’s the tangible book value and mutliple for BAC?
Don’t know…but I do know the cash in my pocket is tangible, therefore their cash is too.
According to Credit Suisse, tangible BV is 12.63 per share.
“Also “Yeah, I think it has more to do with capital levels than cash on the balance sheet.” Is cash not capital??? What better capital do you need than 40 billion in cash??” Exactly. Capital ratios are under pressure and paying a dividend reduces a bank’s capital ratios. Cash carries a zero risk weight when calculating the capital ratio. When a bank pays a dividend, both cash and equity are reduced. However, risk-weighted assets are not reduced. Therefore you have less equity but the same risk weighted assets, which results in lower capital ratios.