Tag Archives: Brian Moynihan

Business, Finance, Occupation & Industry

Bank of America to Pay $500M to Settle Investor Lawsuit

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By The Associated Press

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By CHRISTINA REXRODE

NEW YORK — As soon as Bank of America puts one mortgage-related lawsuit behind it, another always seems to rear its head.

The bank announced Wednesday that it would pay $500 million to settle a class-action lawsuit led by pension funds and other investors who say they were misled about $350 billion worth of mortgage-backed investments they bought from Countrywide, a mortgage lender Bank of America Corp. (BAC) bought in 2008. The bank portrayed the settlement as good news because it resolved the bulk of securities claims related to residential mortgage-backed securities.

But financial analysts, in a conference call to discuss the bank’s first-quarter results, peppered bank executives with questions about another pending settlement. Bank of America is still waiting for court approval for a similar settlement it made with Bank of New York Mellon Corp. (BNY) almost two years ago. If it doesn’t get the go-ahead, Bank of America could have to spend more to resolve the claims.

Bank of America’s stock slumped nearly 5 percent to $11.70. While its earnings were just shy of what analysts expected, it was the bank’s latest liability from mortgage lawsuits that “seems to be the big question for investors,” banking analyst Meredith Whitney said on the conference call.

Chief Financial Officer Bruce Thompson told analysts that the bank felt “very good” about settling the pension funds’ lawsuit. But he acknowledged the uncertainty of potential lawsuits and declined to predict how much the bank might have to spend on litigation in the future.

“I don’t think anyone is going to ever, at this point, declare complete victory,” Thompson said, though he added that the bank was moving through “this pipeline of items” in “a pretty meaningful way.”

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Bank of America’s current troubles are the latest fallout from its decision to buy Countrywide, which was known for making exotic mortgages that later went bad as borrowers defaulted. The purchase catapulted the bank into a spot at the top of the nation’s mortgage scene, but it’s been an albatross ever since, bringing lawsuits, investigations and quarterly losses. Hard-to-predict legal expenses have been a bane to Bank of America and throughout the banking industry.

It was just last quarter that two mortgage-related settlements overshadowed the bank’s results. In early January, the bank took a charge of $2.7 billion to settle a dispute with Fannie Mae, which forced Bank of America to buy back mortgages it had sold to the agency before the crisis. It also took a $1.1 billion charge to settle government accusations that it and other banks had wrongfully foreclosed on some homeowners. The charges sent fourth-quarter earnings down sharply.

Brian Moynihan has been wading through issues dating back to the financial crisis ever since he became CEO in

From: http://www.dailyfinance.com/2013/04/18/bank-america-lawsuit/

Business, Finance, Occupation & Industry

Why Bank of America Is Down Despite Quadrupled Profit

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By Alex Dumortier, CFA, The Motley Fool

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After posting solid gains yesterday, U.S. stocks are falling hard this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average down 0.87% and 0.7%, respectively, at 10 a.m. EDT.

Bank of America still looks cheap
I’ve been a student of Finance and the financial markets for years, and yet I still fall into this trap. After reading the first part of the Reuters headline “Bank of America profits quadruple,” I immediately checked the quote page and was briefly, almost instinctively, surprised to find that the shares were down in premarket trading. I shouldn’t have been; as Howard Marks writes in the excellent book The Most Important Thing: “First level thinking says, ‘I think the company’s earnings will fall; sell.’ Second-level thinking says, ‘I think the company’s earnings will fall less than people expect, and the pleasant surprise will lift the stock; buy.'”

In other words, expectations provide the context necessary to analyze results and their impact on the share price. And so it was that B of A’s quarterly profit rose to $2.62 billion in the first quarter from $653 million in the prior year period, which worked out to $0.20 per share; alas, analysts were looking for $0.22. In addition, total adjusted revenue fell 4%.

It pays to remain focused on what matters relative to your investing style. Mimicking Marks‘ above distinction, I’d say a trader is concerned with the impact of quarterly earnings on the share price, whereas a long-term investor focuses on what earnings can tell us about a company’s future earning power. In that regard, B of A’s results look encouraging on a number of fronts: Brian Moynihan is doing a creditable job shrinking costs, and the provision for loan losses continues to decline, while capitalization ratios continue to improve.

Based on the newly released end-of-first-quarter balance sheet data, Bank of America shares are changing hands at roughly a 10% discount to their tangible book value this morning, and they still look like an attractive (i.e., underpriced) risk to me.

Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analysts Anand Chokkavelu and Matt Koppenheffer lift the veil on the bank’s operations, detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.

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From: http://www.dailyfinance.com/2013/04/17/why-bank-of-america-is-down-despite-quadrupled-pro/

Business, Finance, Occupation & Industry

Obama Sits Down With the Masters of the Universe

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By David Hanson, The Motley Fool

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Thursday morning, Barack Obama met with Jamie Dimon, Lloyd Blankfein, Brian Moynihan, and other members of the country’s largest financial institutions. Let me pause for a minute to let you digest the sheer number of pinstripes and massive egos that strolled into the White House.

While the full details from the meeting between the President and financial leaders weren’t released to the public, it is encouraging to see there is at least some communication present on Capitol Hill. According to the White House, the group discussed housing, education policy, and clean energy financing. Although not explicitly stated, the bankers probably shared their thoughts on the new regulation, such as the Volcker Rule. Of these topics, bank leaders were surely heavily interested in the housing sector.

After drastic deterioration in the housing sector pushed the country into a deep recession, banks and policymakers both received most of the blame. However, looking ahead, a productive relationship between the largest money centers and housing policy makers is absolutely vital to a continued housing and broader economic recovery. The discussion comes at an interesting time, as the nation’s two largest mortgage lenders, Wells Fargo and JPMorgan Chase are set to release earnings on Friday morning.

The two banking behemoths controlled roughly 40% of the mortgage origination market in 2012, and both experienced huge year-over-year revenue increases, as customers’ refinancing accounted for roughly three out of four mortgages. The high refinancing volume was predominantly driven by customers with equity in their homes who jumped at the chance to lock in record low interest rates.

However, the refinancing market is expected to slow, and volume is likely to decline. Enter a necessary productive housing policy. As the refinancing volume becomes a smaller piece of the pie, policymakers and lenders are going to need to be increasingly more in sync. While no one wants to a return to an era of shoddy lending, there is certainly a middle ground that allows banks to support the sector and housing policy while maintaining credit standards.

With the election out of the way, Obama and these leaders may actually be able to make some positive contributions.

With so much of the financial industry getting bad press these days, it may be a “greedy when others are fearful” moment. Not surprisingly, some of Warren Buffett‘s biggest investments are in the space. In the Motley Fool‘s free report, The Stocks Only the Smartest Investors Are Buying, you can learn about a small, under-the-radar bank that’s too tiny for Buffett’s billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.

The article Obama Sits Down With the Masters of the Universe originally appeared on Fool.com.


David Hanson has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase & Co. and Wells

From: http://www.dailyfinance.com/2013/04/11/obama-sits-down-with-the-masters-of-the-universe/

Business, Finance, Occupation & Industry

Face Time With Brian Moynihan: Should I Sell?

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By David Hanson and Matt Koppenheffer, The Motley Fool

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Brian Moynihan was brought in as CEO to clean up the legal issues that were troubling Bank of America . As Moynihan has methodically settled lawsuits and reduced uncertainty around the stock, the bank’s share price has skyrocketed. Given the recent gains, investors may be wondering if now is the time to cash out.

In this video, Motley Fool banking analyst Matt Koppenheffer asks “Brian Moynihan” why investors should hold onto their shares for the long term. 

Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool‘s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

1 Critical Success Factor for Bank of America

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By David Hanson and Matt Koppenheffer, The Motley Fool

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After dealing with legal headaches for the past several years, Bank of America and Brian Moynihan are shifting their attention and effort to actually driving revenue. With interest rates at historic lows and net interest margins tight, banks are searching for opportunities to boost non-interest revenue and build meaningful relationships.

In this video, Motley Fool banking analysts Matt Koppenheffer and David Hanson tell investors which part of the megabank’s business is a crucial factor for its long-term success. 

Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool‘s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Citigroup's Mediocre Ambitions

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By Matt Koppenheffer, The Motley Fool

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The StressTest column appears every Thursday on Fool.com. Check back weekly and follow @TMFStressTest.

“Pay for performance” has become something of a magical mantra for investors. Some company boards seem to have the idea that they can jam through any old pay plan as long as they slap that phrase in front of it. Citigroup  and its awarding of “performance share units” may be a perfect example of this. 

In determining the level of performance units that Citi awards its executives, the bank plans to use two metrics: average return on assets and relative shareholder return. I’ll focus here on the latter.

For starters, total shareholder return is a lousy way to benchmark a company’s executives. Consider Bank of America . Its stock doubled in 2012, giving it the best return of major global banks. (Barclays  was second with a 62% return, and Citi followed in third.) Was that a credit to Brian Moynihan‘s leadership? To some extent, perhaps, but it probably had a lot more to do with the fact that the stock closed 2011 with a price-to-book value of 0.27.

But it’s not just the advisability of using shareholder return for compensation calculations that’s at issue here. Executives at Citi are awarded 100% under that metric if the bank “achieves” the 50th percentile. Yes, you read that correctly, the full award is given for being perfectly average. Above-average results boost the award to greater than 100%.

Most people, myself included, associate words like “bonus” and “performance” with results that are above and beyond the average, not dead-on average. 

The stock is also spring-loaded to help executives meet that very mediocre target. Currently, Citi shares trade at one of the lowest valuations among the major global banks. 

 

Source: S&P Capital IQ.

So to some extent, if executives do anything short of the jaw-droppingly stupid — think, acquiring Countrywide Financial — they’ll benefit from the valuation creeping back up to a level closer to its comps.

I have no bone to pick with the idea of paying Mike Corbat or any other worth-their-salt bank CEO well. At Citi, Corbat is running a multi-national bank with $1.9 trillion in assets and more than 250,000 employees. For (facetious) perspective, a hedge-fund manager with that level of assets under management would want $37 billion in fees regardless of performance. Corbat was paid just over $12 million in 2012.

The problem is the silly notion that achieving a middle-of-the-road result is somehow rewarding “performance.” Either just give them the award outright, or set up a system that’s rewarding real performance. But either way, be honest with shareholders.

But is Citigroup a buy?
Citigroup’s stock looks tantalizingly cheap. Yet the bank’s balance sheet is still in need of more repair, and there’s a considerable amount of uncertainty after a shocking management shakeup. Should investors be treading carefully, or jumping on an opportunity to buy? To help figure out whether Citigroup deserves a spot on your …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Bank of America Is Up Big Today

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By John Grgurich, The Motley Fool

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Bank of America is not only up big today, but has been on a steady upward climb since last Thursday — which leaves us with not one but two financial institutions to thank.

The tale of the tickers
But before we get into that, here’s a quick overview of where B of A, its peers, and the market overall is shaking out so far today:

  • B of A is up 1.15% on the day and 6.06% since last Thursday.
  • Citigroup is up 1.38%.
  • JPMorgan Chase is up 0.27%.
  • Finally, Wells Fargo is up 0.16%.

The market is in the green all around: with the Dow Jones Industrial Average up 0.37%, the S&P 500 up 0.54%, and the Nasdaq up 0.51%.

Thank you Ben and Brian
After not doing much at all last Thursday, B of A began its climb up, up, and away last Friday. Why the lag and leap? If you’ve been following B of A, the banking sector, or just the general news at all over the last week, you already know the answer: the Federal Reserve‘s stress tests.

The 2013 Comprehensive Capital Analysis and Review, known informally as stress tests, put 18 of the country’s largest financial institutions through a simulated, severe economic downturn to see how they would perform from a capital-reserves perspective, and B of A did well — well enough for the Fed to approve a $5 billion share-buyback program. And investors always love share buybacks.

So we have Fed Chairman Ben Bernanke to thank for approving B of A’s capital-return plan, but we also have B of A management to thank.

B of A came out of the financial crisis hurting badly, and Brian Moynihan and his team deserve credit for beginning to fill in the massive hole their predecessors dug the bank into. Basically, if B of A wasn’t in better capital health, it certainly wouldn’t have performed as well as it did on the CCAR. So thank you both, Ben and Brian.

But always remember, Foolish investors, that you’re in this for the long term. Your favorite stocks, in the short term, will always rise and fall — sometimes precipitously. But so long as the companies behind them have sound fundamentals, don’t worry: Your money is in the right place.

Looking for unequaled in-depth analysis on Bank of America? Check out this Motley Fool premium report — expertly researched and written by top Foolish banking analysts Anand Chokkavelu and Matt Koppenheffer.

They’ll help you lift the veil on the bank’s operations, and give you three reasons to buy and three reasons to sell along the way. For immediate access, simply click here now. 

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

15 Reasons Bank of America Is a Buy Right Now

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By Amanda Alix, The Motley Fool

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Big banks are enjoying some heavy media attention lately as they power through Fed-induced stress scenarios designed to test their strength and mettle. The cause of some of the most intense tongue-wagging is Bank of America , as droves of analysts weigh in on the question of the day: Will the nation’s second largest bank finally be able to pay out a decent dividend?

There’s no doubt that there is strong interest in B of A right now, and investors drove the share price back up above $12 in the hours before the stress test results were released.

If you are wondering whether or not Bank of America is on its way out of the doldrums in which it has been mired for the past few years, read on. I’ve pulled together more than a dozen good reasons why B of A is a buy right now — and it really wasn’t that difficult.

1. Valuation. Using the most recent quarterly data, Bank of America currently trades for about 60% of book value, compared with the industry average of 95%, and a tangible book value of 95%, versus a 133% average. Compared to JPMorgan Chase‘s 98% and 140%, Bank of America looks like a bargain.

2. Earnings. Well, OK, they’re not great, but this is an issue of which CEO Brian Moynihan is acutely aware — and is trying to turn around. He has acknowledged that B of A has been lax in the mortgage lending department and has taken steps to increase that lucrative activity. Doubtless, JPMorgan and Wells Fargo‘s impressive revenues from mortgage origination didn’t escape his notice.

3. CEO Brian Moynihan. History shows that Brian Moynihan is exactly the type of leader that Bank of America needs to pull it out of the melancholy it has been experiencing. It’s been done before, and in my opinion, Moynihan will the guy to do it once again. Not to mention that great hair.

4. B of A is working its way out of the mortgage muddle. Bank of America made a Herculean effort on this point within the past year, settling past and future put-back issues with Fannie Mae, as well as other mortgage-based claims — including one regarding shabby foreclosure practices, signed onto along with fellow miscreants JPMorgan, Wells, Citigroup , and Ally Financial. Of course, the threat of more lawsuits hangs in the air, but progress has definitely been made.

5. Delinquent mortgages are down. In the bank’s fourth-quarter earnings transcript, management noted that 60-day delinquent loans have decreased, and the bank expects that trend to continue throughout 2013.

6. The bank is slimmer than ever. Moynihan’s selling off of non-core assets has so far netted the bank a cool $60 billion, about $12 billion of which has gone toward building capital reserves.

7. Capital reserves are higher than most in the industry. Moynihan has so far pushed his bank’s capital reserves to new heights – 11.1% for the …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Citi CEO Corbat Makes a Big, Boring Announcement

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By John Grgurich, The Motley Fool

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“You are what you measure.” So said Citigroup Michael Corbat to a group of Citi executives at a meeting last month in an attempt to succinctly explain how bank executives and their performance would be judged moving forward.  

It’s not exactly the most inspiring call to arms I’ve ever heard, but it’s probably the right direction to steer the bank in nonetheless.

Wake me when its over
Corbat intends to introduce a system of score cards for his top executives that will track how well they perform against their stated financial plans. The score cards will rate them across five categories, with grades ranging from 40 to 100.

In an upcoming meeting, Corbat is also expected to introduce metrics “that will allow analysts and investors to more-easily gauge the company’s performance.” Yawn.

Move over, Patton
Most of us like our leaders to be dashing. To make big statements. To entertain and even sometimes shock us.

Whether it’s General George S. Patton mouthing off to his superiors as he smashes through German lines, or JPMorgan Chase CEO Jamie Dimon mouthing off to reporters as he smashes quarterly earnings records, it’s hard not to be drawn in by big personalities doing big things.

As such, Corbat’s announcement that he’s going to begin trying to get a handle on his bank — which he’s only been CEO of for four months — by measuring everyone and everything in sight is, frankly, disappointing. But this is only at first blush. After the numbing effect of “you are what you measure” begins to wear off, I think it’s clear that this is exactly what Citi needs.

Post financial crisis, only Bank of America is in worse shape than Citi out of the big banks. Both went way off course in the housing boom years and have paid a heavy price in bottom-line-robbing penalties and payouts, and both need discipline right now more than anything else.

Jamie Dimon — while charming, loud-mouthed, and dashing — still instills discipline at JPMorgan, Brian Moynihan is on the case at B of A, and now Corbat is trying the same at Citi. Corbat seems every inch the measured, traditional banker: calm and cautious. It’s not much fun to watch, but investors should probably be thankful.

Looking for complete and in-depth analysis on Citigroup? You’ve come to the right place. Check out our new premium report on the superbank, and let Matt Koppenheffer — The Motley Fool’s senior banking analyst — fill you in on both reasons to buy and reasons to sell Citigroup. He’ll also clue you in on what areas investors need to watch going forward. For instant access to Matt’s personal take on Citi, simply click here now.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Alarming Trend at This Big Bank

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By David Hanson, The Motley Fool

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Bank of America  investors who trusted Brian Moynihan and held on to their shares through 2012 are undoubtedly pleased with the 100%-plus share price appreciation. Rightfully so: Moynihan has been praised for his ability to navigate a legal minefield, divest non-core businesses, and build industry-leading capital ratios. However, B of A’s inactivity in the consumer mortgage origination business in 2012 highlights Moynihan’s lack of operational prowess.

Wrong place, wrong time
In 2012, domestic mortgage origination volume grew a staggering 30% to over $1.8 trillion, primarily due to consumers refinancing homes as housing prices improved and interest rates remained at historical lows. In addition to shuffling his management team in late 2011 and retreating from the bank’s now-infamous $5 debit card fee decision, Moynihan chose to exit the corresponding mortgage lending space, a business in which typically small lenders sell loans to larger lenders. Because of changing capital rules, the correspondent business increased risk-weighted assets during a time when Bank of America desperately needed to show improved liquidity ratios. While it may have been a necessary decision for B of A management to make, correspondent lending accounted for roughly 50% its mortgage lending business, and the exit drastically reduced the bank’s presence in the market.

Ready, aim, originate
Unlike their Charlotte, North Carolina-based rival, Wells Fargo  and JPMorgan Chase  entered 2012 well-positioned to handle the tidal wave of refinancing activity. Wells Fargo burst out of the gate and generated $2.9 billion in mortgage banking non-interest income in the first quarter, a 21% increase from just the previous quarter. Although JPMorgan Chase did not experience the same immediate rush of refinance activity, in the second quarter, origination volume jumped 14% as business in its retail channels surged, a coveted transaction Moynihan hopes to achieve with his bank’s affluent client base. Adding to the joy of these two mortgage behemoths was the lack of competition because of the decimation of lenders after the housing crash. Not only were Wells Fargo and JPMorgan seeing record volumes, they were also seeing increased pricing power!

Source: Quarterly press releases.

Better late than never?
While its competitors raked in the mortgage fees, Bank of America’s mortgage executive, Barbara Desoer, retired in February after a sequence of reduced responsibilities, and B of A’s second-quarter mortgage origination volume decreased 6.8%. While Moynihan and team may have lacked the foresight to ramp up mortgage operation during the first half of the year, they were not ignorant to the environment. After aggressively bolstering operations, they saw third- and fourth-quarter origination volumes increase 43% and 25%, respectively. However, shareholders should value a CEO who is proactive, not reactive.

Source: Quarterly press releases.

As you can see in the above graph, Wells Fargo and JPMorgan Chase saw a relatively stable level of origination volume throughout 2012, thus avoiding the costs of suddenly increasing operations like Bank of America. Although it’s only one quarter of data, the decline …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

More Good News for MBIA?

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By David Hanson, The Motley Fool

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The game of legal cat-and-mouse between MBIA and Bank of America shifted today in favor of the Armonk, New York-based financial guarantee insurer.

In a rare scenario in which B of A was not the accused, a New York Supreme Court judge silenced the cries of multiple banks, including B of A, over MBIA‘s decision to bifurcate and restructure its business between municipal bonds and mortgage-backed securities in 2009. The banks claimed that the asset transfer was unfair because it left the entity exposed to deteriorating MBSes underfunded. The judge’s decision was critical for MBIA as the pending ligation against it was hindering opportunities in the municipal markets. S&P recently cut its credit rating to junk.

The market knows a good legal decision when it hears one. MBIA‘s stock soared immediately after the decision was made public. While MBIA investors unquestionably cheered the decision, Bank of America and its investors were once again on the wrong end of a litigious situation. Although this ruling does not have any bearing on the other ongoing lawsuits between MBIA and B of A regarding alleged material misrepresentation by now bank-owned Countrywide’s past mortgage operations, it should give MBIA slightly more leverage during any settlement negotiations because the company is no longer in a dire operational situation.

Given B of A’s disclosure last week that the New York attorney general was jumping on the bandwagon of those claiming malfeasance by legacy Countrywide, the likelihood of a settlement seemed to have increased. Brian Moynihan and team have the ability to essentially close both cases with a settlement because the New York attorney general’s case would be severely damaged without the legal proceedings that would become available if Bank of America and MBIA were to head to the courtroom. B of A investors did not seem to put much weight on the judge’s decision as shares rallied from negative territory to finish higher on the day.

Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy, and as an added bonus, you’ll receive a full year of FREE updates and expert guidance as key news breaks.

var FoolAnalyticsData = FoolAnalyticsData || []; …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Bank of America CEO Moynihan did not get a pay increase, it was worse than that

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By Paul Hodgson, Contributor I was woken this morning with the news that Brian Moynihan, CEO of Bank of America, had received a 73 percent pay rise, even though the bank was still sorting through all its troubles. As I trawled through all the news sources, this was what was unquestioningly repeated over and over again. Even from this venerable news service. …read more
Source: FULL ARTICLE at Forbes Latest