tag:blogger.com,1999:blog-4815867514277794362.post2943034007865432096..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: How might the BofA stress test workJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-4815867514277794362.post-29635069281778287282009-05-08T23:46:00.000+10:002009-05-08T23:46:00.000+10:00BAC is still a buy...it's the most undervalued of ...BAC is still a buy...it's the most undervalued of the big banks. Assuming they can earn $25 billion in a normal environment you are lookingt at a $250 billion market cap and 7.5 million shares of common.Unknownhttps://www.blogger.com/profile/03537981274809055415noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-70618853441441986742009-05-08T19:01:00.000+10:002009-05-08T19:01:00.000+10:00Good analysis. Some thoughts/questions
ML is inde...Good analysis. Some thoughts/questions<br /><br />ML is indeed a black box and there will be huge losses in the future. However, there are plenty of strategies for deferring the losses including new mtm rules and ability to move assets to level 3. <br /><br />What about Countrywide? This is the biggest portfolio of subprime in the country. Would be interesting to see a realistic loss provision on this portfolio (but guess that would be suicide). I assume the majority of these losses will be taken in post-stress test period so ignored now. <br /><br />Surplus Cash - Isn't this a liquidity issue, not capital/solvency issue. Does BofA disclose undrawn loan committments which are not currently on balance sheet? What about short term debt coming due this year? Banks are building large liquidity balances to cover these items. My guess is much of the surplus cash will be used but liquidity is no longer a problem anyway. <br /><br />The key takeaway here is that the government will not take down the big banks - the solvency question is no longer on the table for discussion. The stress test is largely a confidence building exercise that at first blush appears to have worked on the general population. After all, the government need not convince financial analysts and bloggers, it's Joe Six Pack who drives the economy. There may be some additional dilution in the short term but in the long term, banks should be able to earn their way out of their problems. However, are we creating Japan.....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-35577297912276554122009-05-08T06:18:00.000+10:002009-05-08T06:18:00.000+10:00>Pre-tax, pre-provision earnings are running ab...>Pre-tax, pre-provision earnings are running about 13 billion per quarter<br /><br />this is after compensation is taken into account, right?babar ganeshhttps://www.blogger.com/profile/01898299856773302141noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-77681417326947566042009-05-08T05:41:00.000+10:002009-05-08T05:41:00.000+10:00Along the "making it up as we go along" lines, Tre...Along the "making it up as we go along" lines, Treasury is saying that madatory convertible preferred can be used in calculating TCE. <br /><br />If this is the case it would make sense for BoA to put out an offer to their preferred shareholders to exchange their current preferred for a, say, 7 year preferred that payed the same coupon but that converted at say $20 a share into BAC common.<br /><br />By using this method BoA could raise nearly $10 billion of equity capital for a cost of 500 million shares of dilution which would make meeting the capital raise pretty easy. <br /><br />The upside for the preferred's is that if BoA gets to $30 a share in a few years the preferreds could be worth 37.50 eventually rather than their $25 par value.Unknownhttps://www.blogger.com/profile/03537981274809055415noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-5737890905180049532009-05-08T05:04:00.000+10:002009-05-08T05:04:00.000+10:00The measure is risk-adjusted assets to TCE. Cash (...The measure is risk-adjusted assets to TCE. Cash (and government securities) by definition have 0% risk, thus do not add to risk adjusted assets. Basel II has a whole list of how to weight different classes of assets when calculating risk adjusted assets.Advant Guardhttps://www.blogger.com/profile/13724697741711826082noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-21719888503850349082009-05-08T03:10:00.000+10:002009-05-08T03:10:00.000+10:00i have an MBNA tshirt from bikers week daytona cca...i have an MBNA tshirt from bikers week daytona cca 2003. yeehaaaw baby! they were giving credit cards like candy.<br />funny how tce was the world in ge's case but now is stupid rule don't you think? (i still think it's stupid though). wishing you goodluck but bac is too big and messy to come out of this in the current form, stress test or not.andynoreply@blogger.com