Perhaps Very Slowly, but Bank of America should Move Up from Here
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In an investment world where perception is a large part of the battle, Bank of America (NYSE: BAC) continues to battle its way out of being the ‘Evil Empire’ of the financial world. Not only do they struggle with irate investors, but also the political realm as well.
At its annual meeting in Charlotte, hundreds of protesters gathered to fight (BofA) on several popular issues. Moynihan, 52, presided over a contentious two-hour gathering that was not supposed to generate much news. But—shareholders pressed him on complaints ranging from mortgage practices and foreclosures to customer service.
Aside from the real investors, were perceived and staged threats for political bantering only. The National People’s Action Group who secretly attended—when Moynihan declared the event over, stood up and shouted anti-Bank of America slogans until leaving at the behest of police. These staged protests have nothing to do with the performance of the company. Political agendas that certain groups with certain beliefs have still have an affect upon the perception of the company as a whole.
Compared to a more favorable stock in the banking Industry, Wells Fargo (NYSE: WFC), even by some general fundamentals, the stock does not add up. Bank of America has a multiple of 7.33 lagging far behind the industry leading Wells Fargo at 8.98. It is trading at about 63% of book value while Wells Fargo is also 1.78 times its tangible book value. So Bank of America has a long road a head of it.
It is on the right road, but it is a struggle. In 2011 as it dealt with volatile markets and poor earnings while it posted just $85 million in net income last year. And its stock price dipped to $4.99 in December as investors worried about its health. Bank of America’s stock rose 72% in the first quarter, better than any other company. Of course, that great move was made possible because 2011 left Bank of America’s stock so much in the dump.
The company is focused on meeting the Basel III capital requirements for 2017. Guggenheim Securities analyst Marty Mosby estimated in late April that Bank of America's Basel III Tier 1 common equity ratio would have been "at around 7.8%" as of March 31 as it moves toward meeting those requirements. But as the bank continues to accumulate capital and de-risk the balance sheet over the next year, there is a good chance it will delay any potential raise in dividends until 2013 or 2014.
Bank of America is on the right path and will move ever upward from here—perhaps very slowly. It may not attract a lot of income investors right now and is still battling back against restless investors, political groups, and some bad investments. But nevertheless, it will move upward from here.
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