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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 1
' Bank of America's are the largest. The bank had a paper loss of $109 billion at year end on a $632 billion portfolio of mostly federal agency mortgage securities with maturities of over 10 years. They are carried using held-to-maturity accounting. The bank intends to hold its hold-to-maturity securities to maturity. Those bonds carry an average rate of just 2%, way below current market rates on securities of 5%.
Given the accounting treatment, the paper losses don't depress the bank's capital. But the losses are significant relative to Bank of America's $175 billion of tangible equity at year-end 2022.
JPMorgan was showing an unrealized loss of $36 billion on bond holdings at the end of 2022, compared with Wells Fargo at $41 billion, and Citigroup at $25 billion.''
No. of Recommendations: 1
'' Bank of America's supporters on Wall Street say the bank's bond losses are offset by the rising value of its huge, low-cost deposit franchise of $1.9 trillion, including $1.4 trillion of retail deposits. Banks generally don't put a value on their deposit franchise, but deposits are worth more as rates rise. Having 1% deposits is more valuable in a 4% rate world than in a 1% world.
Bank of America isn't under pressure to sell any of those securities'sales would cause it to realize the losses'given its enormous liquidity. But they will weigh on its returns for years, particularly if the bank is forced to pay more than its current 1% for deposits. 'These are money-good securities and there is no reason to sell them,' says Wells Fargo banking analyst Michael Mayo.
KBW analyst David Konrad wrote on Friday that the Fed 'may begin to more closely look at held-to-maturity losses when addressing capital returns for banks.' That might not be good for Bank of America. The bank declined to comment.
For investors, it pays to stick with quality, and JPMorgan remains a standout. 'JPMorgan is a big beneficiary of the current environment,' Goldberg says. 'It's the gold standard in the industry and has a fortress balance sheet. Customers increasingly will pay for a bank with a fortress balance sheet.'
No. of Recommendations: 0
' Bank of America's are the largest. The bank had a paper loss of $109 billion at year end on a $632 billion portfolio of mostly federal agency mortgage securities with maturities of over 10 years. They are carried using held-to-maturity accounting. The bank intends to hold its hold-to-maturity securities to maturity. Those bonds carry an average rate of just 2%, way below current market rates on securities of 5%.
Buffett must have been confident in BAC (10% of Berkshire's portfolio at year end) but positioned Berkshire for interest rate increases.
Is there more to this story? Be nice to hear Buffett's take on it.
No. of Recommendations: 0
What concerns me is that both JPM and BAC broke down hard on Friday despite substantial deposit inflows. Makes no sense. Moreover, I heard that CDS spreads widened on Friday on BAC. Not getting this.
No. of Recommendations: 0
I wonder what these uninsured deposits at the banks were earning in interest ? Keep in mind that at vanguard, the Fed mmf is the settlement account. So, cash earning 4.5 percent is securing puts, you might be short in a taxable account or, a tax deferred account.
No. of Recommendations: 1
Even though CDS spreads should represent the pure credit risk of the firm, other factors such as worsening macroeconomic conditions also result in a credit spread widening.
