I don't think anyone could have had a positive reaction to Bank of America's (NYSE: BAC) third-quarter report, which was released on Friday. According to Bloomberg, management lost $1 billion in the past three months. Big ouch on that one. The financial institution bled 26 cents per diluted share. No earnings beat here, either. Wall Street sent shares down 4.6% by the end of yesterday's trading session.
The year-ago period was a happier time. Back then, Bank of America was rolling in the dough, posting a profit of 15 cents per share. What a difference 12 months makes. Looking at the nine-month record perhaps gives a small amount of comfort to shareholders. The company made 39 cents per diluted share. Of course, that doesn't sit too well next to the $1.09 per diluted share booked in the comparable period. But at least it's not a loss, know what I mean?
No, I wouldn't blame you for not accepting that point. Truth be told, Bank of America's press release is a scary document to behold. It talks of economic weakness and of a stressed consumer. There was mention of declining property values in both the home and commercial markets. CEO Kenneth D. Lewis himself highlighted the negative effect of credit costs.
Still, there is reason to be hopeful, at least from a trading point of view. If you read between the lines, at least in some portions of the release, you'll note that things might be getting less worse. They better be. Something of sound fundamental logic has to exist to support the run-up seen in shares of Bank of America.
However, going back to the Bloomberg piece, we have to remember that Bank of America looks pretty bad compared to colleagues like Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), and JPMorgan Chase (NYSE: JPM). Those three posted profits earlier in the week. And then there's the whole issue of succession. As we all know, Lewis will be leaving the company soon.
The trader in me says further pullbacks experienced by Bank of America shares should be bought. Fundamentally, however, I might prefer JPMorgan Chase or Goldman Sachs. No matter what, be cautious about getting into Bank of America at this moment in time. Always keep in mind that the financial crisis is still affecting us, even though market sentiment continues to point to sunnier days in the future.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
10-17-2009 @ 3:41PM
Donovan said...
BofA is losing money on their own risky investment ventures again.
Can't keep putting all the blame on the consumers.