How low can BAC go?
Answers
116 points
TThomason answered 11 months ago …
BAC will survive, they have always been able to make it.Feds allowed them to buy out Merrill, part of the buy out was that the feds would interject more funds if needed. They bought out Countrywide. clean up its process, made many changes, got rid of the "Used car salesman" making decisions for all, they are after quality borrowers, Once the name change takes place, The name of Countrywide will be long forgotten. Remember Countrywide was not the sole problem with the down fall of the housing industry, they were the first to be mentioned. Citi and Washington Mutual had much larger losses than Countrywide.
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989 points
rvilmur answered 11 months ago …
Quite low because of the continuing bank problems and subsequent write offs of bad paper. I expect that BAC is a bank that will not be allowed to fail; but every cash injection from the government will continue to seriously dilute current stock holders. So survival is a yes; but it won't be worth much. I would not be a buyer of the stock.
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3963 points
MNSL answered 11 months ago …
Credit risk is a significant risk in banking derivatives’ trading activities
There is no end to bailouts. I think something is wrong in the banking systems. Investors should think twice before putting their money in weak banks and weak sectors. It think this is the time to create more and more productive jobs than bailing out more and more bankrupt companies.. This will lead to increase consumer purchasing power in the long run and many viable industries will benefit.
Assets should be revalued from the present inflated prices to realistic levels. Otherwise we will see more and more worst bubble in the future. For example Asian pacific market will have worst bubble in the history during next 10 years if inflated property prices not adjusted to realistic value.
If unemployment rises in a rapid race there will not be any demand for some products in the future and those companies also will become bankrupt.
Pl see following links:
http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&ne wsId=20090116005773&newsLang=en
Fitch Ratings has downgraded the long-term Issuer Default Rating (IDR) of Bank of America, N.A. (BANA) and other bank subsidiaries of Bank of America Corporation (BAC) to `A+' from `AA-'.
http://online.wsj.com/article/BT-CO-20090116-714099.html
Moody's Investors Service and Fitch Ratings cut their ratings on Bank of America Corp. (BAC), after the banking giant reported substantial fourth-quarter losses at Merrill Lynch and more modest losses at Bank of America.
In the meantimes some anaylsts have concern about credit risk. Credit risk is a significant risk in banking derivatives’ trading activities
http://www.investorvillage.com/mbthread.asp?mb=4429&tid=5388104&sh owall=1
Here I will summarize one stat I never published on here before, which is total credit derivative exposure and most importantly I believe, ratio of credit derivatives to total assets
Because most of the credit derivatives are level III assets, difficult or impossible to price, and many of them are crashing in value, looking at the credit derivative exposure gives you a good idea of a bank's derivative risks.
Bank Assets ($B) Credit derivs Ratio to assets Notes
HSBC USA 188 1341 7.1 Very active in CDS
JP Morgan 1408 8121 5.8 Very active in CDS
Citigroup 1293 3351 2.6 Very active in CDS
Bank of America 1355 3099 2.3 Very active in CDS
Wachovia 666 454 0.7
Merrill Lynch Bank 63 9.2 0.1
Bank of New York 128 2 0.0
U.S. Bank 237 1.7 0.0 Owned by BRK
Wells Fargo 487 2 0.0 Owned by BRK
RBS Citizens 131 0.3 0.0
Couple observations:
HSBC is "going for broke", they have $1.3 trillion of credit derivatives and $188 billion of assets.
All the giant banks are playing games with credit default swaps of huge notional amounts
Look at the banks that Buffett owns ... no credit derivative exposure
Citizens Bank (RBS) which I just discovered also seems very conservative
104 points
lipps answered one month ago …
BAC is a bad company
They do not have the consumer skills needed to maintain quality relationships with the new banking consumer. Because of this as the economy again rebounds, they will be losing many many customers.
This will cause a fall in stocks, and result in a loss of your net gains on the stock.
Stay away from them
