Author Topic: BAC-WT - Bank of America Warrants  (Read 2057110 times)

Valuehalla

  • Sr. Member
  • ****
  • Posts: 301
  • Who wants to earn forever
Re: BAC-WT - Bank of America Warrants
« Reply #7280 on: June 29, 2018, 12:19:32 PM »
THX a lot, you gave a clear and simple overview on the situation. In comparison to WFC, the redemtion from BAC looks poor.
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM


Viking

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1301
Re: BAC-WT - Bank of America Warrants
« Reply #7281 on: June 29, 2018, 12:39:11 PM »
Valuehalla, it shows you how far BAC has come that we are disappointed with $26 billion in capital return.

My guess is Moynihan is wanting to demonstrate that he is running BAC in a very risk averse way. Last year they were approved to return $16 billion; this amount was increased by $5 billion in Q4 so they will return $21 billion total. This years award was $5 billion more. Perhaps Moynihan wants to keep room for nice large increase next year as well. My guess is he is going to take some heat for being so cautious this year.

BAC may also feel the shares are still cheap so they want to go heavy on the buybacks while this is still the case. Of the $26 billion, about $6 billion will go to pay the dividend so that will leave about $20 billion for the buyback. With the shares currently trading at $28.50 this will allow BAC to retire 700 million shares or about 7% of shares outstanding. As I have mentioned before BAC has warrants that will convert to shares later this year early next year (this is the last of the warrants) so Moynihan may want to go heavy on the buybacks this CCAR cycle.

Bottom line is shareholders will see about 9% return of capital (2% dividend and 7% share repurchase) which is solid. More importantly, BAC will continue to grow its business and total earnings so patient investors should do quite well over the next couple of years.
« Last Edit: June 29, 2018, 12:40:56 PM by Viking »

gary17

  • Hero Member
  • *****
  • Posts: 1136
Re: BAC-WT - Bank of America Warrants
« Reply #7282 on: June 29, 2018, 12:48:44 PM »
In comparison WFC is returning about 12% -

John Hjorth

  • Hero Member
  • *****
  • Posts: 1935
Re: BAC-WT - Bank of America Warrants
« Reply #7283 on: June 29, 2018, 01:54:41 PM »
Bloomberg [June 29th 2018]: Forget Banks and Worry About High Stock Prices.

I honestly find this hilarious! - Why not just buy some bank stocks instead? Personally, I'm really stunned by the market reaction for the big four US banks today on the CCAR Announcements from them yesterday. They are really in the doghouse - still.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

MVP444300

  • Full Member
  • ***
  • Posts: 100
Re: BAC-WT - Bank of America Warrants
« Reply #7284 on: June 29, 2018, 01:56:23 PM »
With the recent price drop in the warrant from $21 to $16 per share and being so close to expiration I'm kicking myself for not converting to common stock.

Any recommendations on whether to hold until expiration to convert to common or go ahead and do it now?

Valuehalla

  • Sr. Member
  • ****
  • Posts: 301
  • Who wants to earn forever
Re: BAC-WT - Bank of America Warrants
« Reply #7285 on: June 30, 2018, 05:23:42 AM »
I have a much larger position of BAC, than of WFC. I love both as my bank-stocks in my portfolio.

And after thinking about the situation and the great comments of Viking, I feel comfortable with that.

Regarding the expected earnings for 2019 of 27,5 B for BAC and 23,5 B for WFC I think the marketcap of BAC shall bei 15 to 19 % above WFC. If it is true that BAC is growing earnings more fast than WFC in the future, the difference shall be even higher than app 17 %.

That is not the case now: Now MarketCap of BAC is just 6 % over WFC. So this means to me, the price of BAC shall increase faster than WFC.

The fact that WFC is now returning 12 % (32B of 261,3B) to us as shareholders and BAC just 9 % (26B of 290,5B) is irrelevant for me. The valuation of BAC shall be clearly above WFC.

« Last Edit: June 30, 2018, 05:34:30 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

rkbabang

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3832
Re: BAC-WT - Bank of America Warrants
« Reply #7286 on: July 01, 2018, 11:06:59 AM »
With the recent price drop in the warrant from $21 to $16 per share and being so close to expiration I'm kicking myself for not converting to common stock.

Any recommendations on whether to hold until expiration to convert to common or go ahead and do it now?

I have the same regret. I have one question, If these are held until expiry do they convert automatically or do you need to call your broker?

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2557
Re: BAC-WT - Bank of America Warrants
« Reply #7287 on: July 01, 2018, 11:15:14 AM »
For taxes on the warrant, I was under the impression that if you convert, no taxes are due until you sell the common. I found this and now not so sure:

https://finance.zacks.com/taxation-stock-warrants-7458.html

"The difference between the strike price and the price of a share, minus the cost basis, is taxable income. Suppose you exercise warrants with a strike price of $30 per share to buy 100 shares of XY Company and you originally paid $500 for the warrants. Your total investment is thus $3,500. If the market price on the day of exercise is $50, the stock is worth $5,000 and the difference is $1,500. This $1,500 is taxable as ordinary income in the year of exercise. It is not a capital gain because you did not own the shares prior to exercising the warrants."

anyone know how these are taxed? Thanks!
Paul

Viking

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1301
Re: BAC-WT - Bank of America Warrants
« Reply #7288 on: July 01, 2018, 12:11:23 PM »
I have a much larger position of BAC, than of WFC. I love both as my bank-stocks in my portfolio.

And after thinking about the situation and the great comments of Viking, I feel comfortable with that.

Regarding the expected earnings for 2019 of 27,5 B for BAC and 23,5 B for WFC I think the marketcap of BAC shall bei 15 to 19 % above WFC. If it is true that BAC is growing earnings more fast than WFC in the future, the difference shall be even higher than app 17 %.

That is not the case now: Now MarketCap of BAC is just 6 % over WFC. So this means to me, the price of BAC shall increase faster than WFC.

The fact that WFC is now returning 12 % (32B of 261,3B) to us as shareholders and BAC just 9 % (26B of 290,5B) is irrelevant for me. The valuation of BAC shall be clearly above WFC.

Valuehalla, it really is interesting to look at EPS growth for BAC going back 3 years and then 2018 and 2019 estimates. Amazing turnaround. Compare EPS growth (and estimates) at WFC over the same 5 year period. BAC has clearly outperformed and its share price has as well.

However, I wonder if WFC stock is not looking a little like a coiled spring. I believe WFC is currently incurring large one time costs to remedy sales practice scandal etc. These costs should start to roll off in 2020 and when they do we may see EPS at WFC start to take off. I do have a small position in WFC as I view it as a solid long term holding. BAC continues to be my largest holding. C is now my second largest position.