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MS quick update research on BAC
Quick Comment: Buy BAC on
Weakness
Impact on our views: BAC is an investment in
improving credit. Credit quality is just beginning to
improve at BAC as evidenced by yesterday’s master
trust data and in today’s lower than expected reserve
build. We would be buying BAC on weakness today,
based on anticipated peaking of consumer credit. BAC
is skewed to early cycle consumer credit (70% of
managed loans are consumer).
What’s new: BAC reported 3Q09 EPS of $(0.26). We
see operating of $(0.12). Excludes one-timers related to
merger costs (4c), OTTI (6c) and the cost to exit the
asset guarantee with the US Gov’t (3c). Operating EPS
was in-line with consensus of $(0.11), but below our
estimate of $0.02. Miss vs. MS on lower top line. We
believe the miss is driven by credit-related items – NII
was weaker than expected on higher NPLs and we
believe credit card income was lower on trust support.
Investment thesis: BAC is our top pick in Large Cap
Banks. It has a skew to early-cycle capital markets
revenues (25% of revenues) and card (18% of managed
loan balances). We expect card NCOs to peak in 3Q09,
eliminating further reserve build for card. We anticipate
total NPLs peaking in 4Q09 / 1Q10. We have an
Attractive view on the Large Cap Bank group, driven by
an expectation for deceleration in jobless
claims/unemployment/GDP shrinkage.
Industry View
Attractive Key Ratios and Statistics
Reuters: BAC.N Bloomberg: BAC US
Banking – Large Cap Banks / United States of America
Price target $30.00
Shr price, close (Oct 15, 2009) $18.10
Mkt cap, curr (mm) $157,197
52-Week Range $26.08-2.53
MS quick update research on BAC after the announcement
Quick Comment: Buy BAC on
Weakness
Impact on our views: BAC is an investment in improving credit. Credit quality is just beginning to improve at BAC as evidenced by yesterday’s master trust data and in today’s lower than expected reserve build. We would be buying BAC on weakness today, based on anticipated peaking of consumer credit. BAC is skewed to early cycle consumer credit (70% of managed loans are consumer). What’s new: BAC reported 3Q09 EPS of $(0.26). We see operating of $(0.12). Excludes one-timers related to
merger costs (4c), OTTI (6c) and the cost to exit the asset guarantee with the US Gov’t (3c). Operating EPS was in-line with consensus of $(0.11), but below our estimate of $0.02. Miss vs. MS on lower top line. We believe the miss is driven by credit-related items – NII was weaker than expected on higher NPLs and we believe credit card income was lower on trust support. Investment thesis: BAC is our top pick in Large Cap Banks. It has a skew to early-cycle capital markets revenues (25% of revenues) and card (18% of managed loan balances). We expect card NCOs to peak in 3Q09, eliminating further reserve build for card. We anticipate total NPLs peaking in 4Q09 / 1Q10. We have an Attractive view on the Large Cap Bank group, driven by an expectation for deceleration in jobless
claims/unemployment/GDP shrinkage.
Industry View
Attractive Key Ratios and Statistics
Reuters: BAC.N Bloomberg: BAC US
Banking – Large Cap Banks / United States of America
Price target $30.00
Shr price, close (Oct 15, 2009) $18.10
Mkt cap, curr (mm) $157,197
52-Week Range $26.08-2.53
Thanks j
Two Beggars in Rome– are sitting side by side on a street in Rome.
One has a cross in front of him the other one the Star of David.
Many people go by and look at both beggars, but only put money into the hat of the beggar sitting behind the cross.
A priest comes by, stops and watches throngs of people giving money to the beggar behind the cross, but none give to the beggar behind the Star of David.
Finally, the priest goes over to the beggar behind the Star of David and says, ‘My poor fellow, don’t you understand? This is a Catholic country; this city is the seat of Catholicism… People aren’t going to give money if you sit there with a Star of David in front of you, especially when you’re sitting beside a beggar who has a cross. In fact, they would probably give to him just out of spite.’
The beggar behind the Star of David listened to the priest, turned to the other beggar with the cross and said: ‘Moishe, look who’s trying to teach the Goldstein brothers about marketing?
Good one.
from Cashin’s Comments this morn.. on the dolla:
Is The Dollar Nearing A Turning Point? – We were going to discuss some potential changes in the on-going decline of the dollar when something hit our in-box. It was a discussion of the same topic from the very savvy TJ Marta. Since I’m always ready to let a brigter mind do the heavy lifting, here’s what he says:
The US$ is rebounding overnight on the back of rhetoric from both the US and Japan. The US Treasury has criticized China’s FX policy, although it did stop short of accusing China of manipulating its currency. Japan’s
currency advisor added support for the USD, calling on the US, Japan and China to collaborate in supporting the US$. Last week we saw FX intervention by central banks to support the dollar, counter to the drop in percentage of US$ held in FX reserves during Q2. This market segment is apparently turning, or at least moderating in its view of the US$ price. The speculative community, as measured by the CFTC non-commercial positions, is very underweight the US$, suggesting little potential to add to greenback weakness. While no one is overwhelmingly bullish on the US$, it remains ripe for a short-covering rally. Such would be consistent with the faltering of the price of gold observed this week and increasing warnings of an equity correction from technical analysts.
As TJ indicates, the weak U.S. dollar is becoming more than an annoyance to this rest of the globe. If there is no coordinated effort to stabilize the greenback (highly unlikely) a bout of competitive devaluations could break out. That could turn very ugly.
Most commentators miss the real problem that other nations see in the dollar weakness. We don’t believe they fear a sudden burst of U.S. exports. Rather, they recall that the Chinese Yuan is still tightly pegged to the greenback. Thus, the falling dollar makes Chinese goods even cheaper. That’s not what the rest of the world wants to see.
Pressure is building. So is tension. Something is about to happen, we believe.
Fly, what does it mean to you when your stocks drop easier than they rise?
mrckcbill made a bid for the sample of Michael Jackson’s burned hair.
Fazzzy! alllll aaaaboarddd!
FIG
You seem surprised?
man, the 10K sure did look scammy. i’m considering getting out of a neutral position and closing my remaining long hedges at the end-of-day, leaving only the shorts.
Jed, likes to use the provided motorized cart at “The Wal-Mart”
http://www.peopleofwalmart.com
Here’s my fave:
http://www.peopleofwalmart.com/?paged=21
Dear Mr. Fly,
Z-nanny would like to thank you for buying her such a radical hot faz-mobile.
Many Thanks,
-Z
Fly has a new time machine. http://www.ultimasports.co.uk