JOACKIN
joakin
La più grande banca americana ora è Bank of America (grafico) che ha inglobato Countrywide, il maggiore operatore privato nei mutui (dopo Fannie Mae che è pubblica) e Merril Lynch e ha ora 2.200 miliardi di bilancio, più del PIL della Francia
Il 10 marzo Bank of America (grafico) era sui 3 dollari e ieri ha chiuso a 14 dollari, +350% come se fosse un titolino. Questa settimana vende 17 miliardi di dollari di azioni per raccogliere capitali e lo fa sul mercato aperto non con un aumento di capitale vero e proprio e nonostante questo annuncio il titolo era su del 20% ieri (questo da una misura del fatto che dopo l'annuncio dello stress test la comprano alla disperata)
Avevo suggerito in marzo Bank of America (grafico) sui minimi poi però venduto dopo quindici giorni e ad una signora che mi ha telefonato a fine aprile con BAC sui 9 dollari ho suggerito di venderlo e comprare qualche altra banca, invece appunto è salito ancora a 14$, per cui che non andasse fallito mi era chiaro ma che quadruplicasse meno
Dick Bove e altri nel weekend dicono che Bank of America (grafico) può tornare in due anni a 50 dollari ai vecchi massimi perchè guadagna ora sui 40 miliardi prima delle tasse di utile. Avendo la garanzia dei depositi piena e anche del suo debito da parte del Tesoro USA raccoglie depositi a meno dell'1% e presta dal 4% in su
Chiaro che se la maggiore banca USA può salire ancora da 14 a 30 o 40 dollari questo tira sul mercato
questa è l'analisi migliore che ho trovato di uno che l'ha suggerita anche in marzo e gestisce un hedge fund australiano specializzato in banche. Il succo è che ha 200 miliardi di cash fermo per prudenza a bilancio, un enorme bilancio di "trading" ereditato da Merrill Lynch (grafico) Lynch e quindi poi di crediti ha meno 1.000 miliardi su cui guadagna ora molto grazie al governo che usa i soldi dei contribuenti per aiutarla. L'incognita sono le carte di credito e l'immobiliare commerciale, ma sono poco su 2.200 miliardi e soprattutto Merril Lynch che invece sono 1.000 miliardi di asset e che nel primo trimestre ha azzeccato il trading, ma non si sa mai
---------------------- John Heston
The company has a total balance sheet of 2,322.0 billion – but only 977.0 billion of loans (less after provisions). By the time you add in an investment bank you get an awfully big number of assets (trading and other). But 86.9 billion in goodwill and 13.7 billion is other intangibles. The tangible assets are thus 2221.4 billion. 4% of this is 88.9 billion.
The shareholder equity is 239.5 billion but you need to subtract off the same intangibles. You then wind up with 138.9 billion in tangible equity. There is a whack of preferreds (including TARP) and you have 65.6 billion of tangible common equity. Prima facie the company has 65.6 billion in tangible common equity. The bank is prima facie short 23.3 billion of capital. I have put this in the following spreadsheet.
Summary
Balance sheet data in billions Total assets 2322.0 Goodwill 86.9 Other intangibles 13.7 Tangible total assets 2221.4 4% of this is 88.9 BofA shareholder equity 239.5 Goodwill 86.9 Other intangibles 13.7 Tangible equity 138.9 Preferred stock (including TARP) 73.3 Tangible common equity 65.6 Current tangible common equity ratio 3.0% Prima facie current shortfall 23.3
This number differs a little from the numbers in the last quarterly report. Here they are.
This suggests that we have a 3.13 percent tangible common ratio – and the difference is tax assets and liabilities associated with the intangibles – see the footnote. I am just going to accept the number. Addition - main difference is the risk weighting of some of the off balancec sheet stuff...
Using that number we have 3.13 percent tangible capital, somewhat better than the 3.0 percent calculated above – and the shortfall is “only” 19.3 billion rather than 23.3 billion. The widely mooted current shortfall is about 20 billion.
But it is not the current shortfall that matters. It is the projected adverse circumstances shortfall at the end of next year that matters.
Now suppose that BofA has zero growth between now and the end of next year. Then the required capital will not have changed – and the bank will have had some pre-tax, pre-provision earnings.
It will in fact have had a lot of them. Pre-tax, pre-provision earnings are running about 13 billion per quarter at the moment ($39 billion for the rest of this year plus another 52 billion next year for a total of 91 billion). It will also have a further 6 billion in “earnings” from the Merrill Lynch synergies.* So they will have 97 billion in earnings before losses.
But lots of losses – an amount that none of us really know. If they have 77 billion in losses they will still recover the 20 billion current shortfall and they will thus pass the stress test.
Now is 77 billion possible? Yes – but it is pretty bad if you think it has to come from the loan book. The loan book is 977 billion and already has 29 billion of provisions against them. The loan book might be that bad in an adverse circumstance – but frankly I doubt it. The actual losses last quarter were way less than that rate – though the company provisioned considerably more than they charged off and they projected the losses would get worse. Expost addition - the loss here is more or less what they think will happen in the stress test. I happen to think the stress test loss estimate is just too high - but that is one of those things that people will differ about.
The non-loan book (and the off-balance sheet credit card book) could cause distress in the stress scenario. The particular issue is the credit card book – and I would expect profits to go away – but this is MBNA not Metris – and my guess is that the book will hurt but not kill. A credit card stress test here is solvable with 5mg of valium (a very small dose – read a mg for a billion dollars and you get it about right).
Far more problematic is the possibly they could blow up the (Merrill Lynch) trading book again. Merrills – rather than anything else is the black box at BofA. I suspect/hope that Bank of America has been steadfastly trying to de-risk the Merrill Lynch book. Sure they shouldn’t have purchased it – but they have taken a whack of charges against it and the trading book is likely – at least in the next thirty days – to show some reverses. After all –what were those year end charges about. And they can sell good slabs of this book reducing total assets and hence required tangible common equity. Still it is the trading book that is the black-box here and I have no idea how much valium is required to remove stress.
The best thing though about the non-loan book is that it is easy to liquidate. They can shrink it.
Indeed the easiest thing to shrink is the cash balance. I have pointed out that the cash balance of BofA is enormous – and in the stupid rule of the week the 4% TCE ratio includes 4% of cash. The rule is pretty clear – 4 percent on total assets including the huge excess cash balances BofA is holding. Just by increasing risk (through shrinking cash balances) BofA can solve $6 billion of its shortfall.
But in the end it comes down to the trading book which should, after some run-off, be shrinkable. The only question being how much do they lose by shrinking it? And that depends where it is marked. And to that – well I think you need to be an insider to know.
Il 10 marzo Bank of America (grafico) era sui 3 dollari e ieri ha chiuso a 14 dollari, +350% come se fosse un titolino. Questa settimana vende 17 miliardi di dollari di azioni per raccogliere capitali e lo fa sul mercato aperto non con un aumento di capitale vero e proprio e nonostante questo annuncio il titolo era su del 20% ieri (questo da una misura del fatto che dopo l'annuncio dello stress test la comprano alla disperata)
Avevo suggerito in marzo Bank of America (grafico) sui minimi poi però venduto dopo quindici giorni e ad una signora che mi ha telefonato a fine aprile con BAC sui 9 dollari ho suggerito di venderlo e comprare qualche altra banca, invece appunto è salito ancora a 14$, per cui che non andasse fallito mi era chiaro ma che quadruplicasse meno
Dick Bove e altri nel weekend dicono che Bank of America (grafico) può tornare in due anni a 50 dollari ai vecchi massimi perchè guadagna ora sui 40 miliardi prima delle tasse di utile. Avendo la garanzia dei depositi piena e anche del suo debito da parte del Tesoro USA raccoglie depositi a meno dell'1% e presta dal 4% in su
Chiaro che se la maggiore banca USA può salire ancora da 14 a 30 o 40 dollari questo tira sul mercato
questa è l'analisi migliore che ho trovato di uno che l'ha suggerita anche in marzo e gestisce un hedge fund australiano specializzato in banche. Il succo è che ha 200 miliardi di cash fermo per prudenza a bilancio, un enorme bilancio di "trading" ereditato da Merrill Lynch (grafico) Lynch e quindi poi di crediti ha meno 1.000 miliardi su cui guadagna ora molto grazie al governo che usa i soldi dei contribuenti per aiutarla. L'incognita sono le carte di credito e l'immobiliare commerciale, ma sono poco su 2.200 miliardi e soprattutto Merril Lynch che invece sono 1.000 miliardi di asset e che nel primo trimestre ha azzeccato il trading, ma non si sa mai
---------------------- John Heston
The company has a total balance sheet of 2,322.0 billion – but only 977.0 billion of loans (less after provisions). By the time you add in an investment bank you get an awfully big number of assets (trading and other). But 86.9 billion in goodwill and 13.7 billion is other intangibles. The tangible assets are thus 2221.4 billion. 4% of this is 88.9 billion.
The shareholder equity is 239.5 billion but you need to subtract off the same intangibles. You then wind up with 138.9 billion in tangible equity. There is a whack of preferreds (including TARP) and you have 65.6 billion of tangible common equity. Prima facie the company has 65.6 billion in tangible common equity. The bank is prima facie short 23.3 billion of capital. I have put this in the following spreadsheet.
Summary
Balance sheet data in billions Total assets 2322.0 Goodwill 86.9 Other intangibles 13.7 Tangible total assets 2221.4 4% of this is 88.9 BofA shareholder equity 239.5 Goodwill 86.9 Other intangibles 13.7 Tangible equity 138.9 Preferred stock (including TARP) 73.3 Tangible common equity 65.6 Current tangible common equity ratio 3.0% Prima facie current shortfall 23.3
This number differs a little from the numbers in the last quarterly report. Here they are.
This suggests that we have a 3.13 percent tangible common ratio – and the difference is tax assets and liabilities associated with the intangibles – see the footnote. I am just going to accept the number. Addition - main difference is the risk weighting of some of the off balancec sheet stuff...
Using that number we have 3.13 percent tangible capital, somewhat better than the 3.0 percent calculated above – and the shortfall is “only” 19.3 billion rather than 23.3 billion. The widely mooted current shortfall is about 20 billion.
But it is not the current shortfall that matters. It is the projected adverse circumstances shortfall at the end of next year that matters.
Now suppose that BofA has zero growth between now and the end of next year. Then the required capital will not have changed – and the bank will have had some pre-tax, pre-provision earnings.
It will in fact have had a lot of them. Pre-tax, pre-provision earnings are running about 13 billion per quarter at the moment ($39 billion for the rest of this year plus another 52 billion next year for a total of 91 billion). It will also have a further 6 billion in “earnings” from the Merrill Lynch synergies.* So they will have 97 billion in earnings before losses.
But lots of losses – an amount that none of us really know. If they have 77 billion in losses they will still recover the 20 billion current shortfall and they will thus pass the stress test.
Now is 77 billion possible? Yes – but it is pretty bad if you think it has to come from the loan book. The loan book is 977 billion and already has 29 billion of provisions against them. The loan book might be that bad in an adverse circumstance – but frankly I doubt it. The actual losses last quarter were way less than that rate – though the company provisioned considerably more than they charged off and they projected the losses would get worse. Expost addition - the loss here is more or less what they think will happen in the stress test. I happen to think the stress test loss estimate is just too high - but that is one of those things that people will differ about.
The non-loan book (and the off-balance sheet credit card book) could cause distress in the stress scenario. The particular issue is the credit card book – and I would expect profits to go away – but this is MBNA not Metris – and my guess is that the book will hurt but not kill. A credit card stress test here is solvable with 5mg of valium (a very small dose – read a mg for a billion dollars and you get it about right).
Far more problematic is the possibly they could blow up the (Merrill Lynch) trading book again. Merrills – rather than anything else is the black box at BofA. I suspect/hope that Bank of America has been steadfastly trying to de-risk the Merrill Lynch book. Sure they shouldn’t have purchased it – but they have taken a whack of charges against it and the trading book is likely – at least in the next thirty days – to show some reverses. After all –what were those year end charges about. And they can sell good slabs of this book reducing total assets and hence required tangible common equity. Still it is the trading book that is the black-box here and I have no idea how much valium is required to remove stress.
The best thing though about the non-loan book is that it is easy to liquidate. They can shrink it.
Indeed the easiest thing to shrink is the cash balance. I have pointed out that the cash balance of BofA is enormous – and in the stupid rule of the week the 4% TCE ratio includes 4% of cash. The rule is pretty clear – 4 percent on total assets including the huge excess cash balances BofA is holding. Just by increasing risk (through shrinking cash balances) BofA can solve $6 billion of its shortfall.
But in the end it comes down to the trading book which should, after some run-off, be shrinkable. The only question being how much do they lose by shrinking it? And that depends where it is marked. And to that – well I think you need to be an insider to know.
