Undoubtedly, Bank of America Corp (NYSE:BAC) quadrupled its stock from early 2009. But bank of America is still at stage of crises. It is apparent from the market review of 2010 in which stock prices also keep its declining trend.
The reasons of critical situation are obvious. Lack of enthusiasm of investors is not hidden. Banks were also facing crises in 2008-2009 and Bank of America was at most weakest point due to buyback claims of distressed borrowers. New restrains on proprietary trading and higher capital requirements may be hauling earning in future.
Trading of Bank of America Corp (NYSE:BAC) is about 10 times of earnings and 0.68 book value. While talking rigorous metric of price-to-tangible book in which intangible assets are not included, we get result of multiple of 1.1 times.
It means that Bank of America having worth of no more than dead. This is also reality that investor are giving no worth to bank. It seems that by cleaning its loan book, bank may gain nationwide improvements.
Let’s have look of some facts and figures from the last published report
Bank of America net charge-offs and provisions trend down from $2.1 billion in 2012 to $1.2 billion in the second quarter of 2013. The number of mortgage loans has also been cut down from $ 1.1 million to 492000 last quarters. Bank is ahead of JPMorgan with the bank’s Basel III tier 1 capital ratio at 9.6% as of last quarter. It is evident that overall leverage continues to contract.
In the meantime, Bank of America is enhancing consumer credit card and auto loan business. Its client’s brokerage assets are up to 17% over the year.
How you can anticipate worth of bank with all this?
Mohnish Pabrai and Bruce Berkowitz well renowned investors invested about 22.9% of funds in Bank of America. Berkowitz, manager of the Fairholm Fund also make large investment of 16.9% in Bank of America. It is not appealing situation that the largest single holding of two well-respected value investors with phenomenal long-term track records.