Subject: Re: BAC
Matt Levine quoting someone else:

I believe it's the FT article.
Probably paywalled https://www.ft.com/content/df4...

Yup, it's a bit of a mis-step for sure.
BofA's mark-to-market losses are over $100bn.
Compare the other 3 of the 4 biggest: JPM and WFC at around $40bn, Citi at around $25bn.
Memo to self: never reach for yield.

It's really crass of me to quote myself, but I will anyway. From a post of mine from spring 2019:
"From 2017 to 2018, pre-tax profit rose 15%, but because of the tax cut the net profit rose 33%.
The tax cut moved their 2018 ROA from would have been 1.03% (truly outstanding for them) to 1.20% (which is actually good) and a double digit ROE.
If they could average that through the business cycle I would recant most of the negative things I've said,
and at today's price (10.25 times estimated 2019 earnings) it would be a decent pick.
A skeptic would note their historically uncanny ability to step into every pile of doodoo that arises anywhere. Maybe that will change.
http://www.datahelper.com/mi/s...

Foot, meet 12 digits of poop.
Recent ROA is somewhat predictably back down to around 0.9%, their old normal, and may be headed lower.

In some ways it's just temporal poop: they got some small short term earnings in return for foregoing better earnings later.
The article continues:

"BofA has said it has no plans to sell the underwater bonds, avoiding crystallised
losses that for now exist only on paper. The bank's portfolio consists of highly
rated government-backed securities that are likely to eventually be paid back when
the underlying loans mature.
But holding on to the relatively low-yielding investments, many of which are
backed by 30-year home loans, at a time when newly purchased bonds yield significantly
more, could limit the income that BofA can generate from its customer deposits.
'I think the jury is still out,' said Jason Goldberg, a bank analyst at Barclays,
of BofA's bond portfolio. 'When rates were low they were making more money than rivals.
Fast-forward to today and they are making less.'

Huh, the returns from low-yielding bonds turned out to be...low.


Jim