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Poll: actual BAC price at warrant expiry


racemize
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What is your best guess at the actual BAC price at warrant expiry (not conservative)?  

222 members have voted

  1. 1. What is your best guess at the actual BAC price at warrant expiry (not conservative)?

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Assets Dec 2012: $2,212 B

Real growth: only 2% per year

Inflation: only 2% per year

Years till expiration: more than 5 years

 

Now supposing:

 

* Assets growing at only nominal GDP.

* No buybacks.

* No DTA benefits.

* No hidden capital, 30B allowance covers only current problems.

* keeping capital to maintain current leverage.

* so more than 2/3 of EPS paid as dividends.

 

Assets Dec 2017: 2,691

 

EPS at

1.0% ROA $2.6

1.2% ROA $3.1

1.4% ROA $3.6

1.6% ROA $4.1

 

Choose a multiple.

 

 

 

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  • 6 months later...

Less than $15 could happen from a forced unwind of the derivatives or from a collapse of European banks or a failure to anticipate early enough a change to regulatory structure for rules which will take years to unwind. The bankruptcy rule giving derivatives super priority plus making the rest pay for the expense of recovery will be changed eventually to start the return to sanity. eventually there is a harsh downturn to correct the distortions of price control. When this occurs off balance sheet will be seen as the cause and rules will be imposed to shrink instead off growing off balance sheet and derivatives. WFC seems far more ready compared to BAC.

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Plan, I think you are a bit aggressive with your ROA assumptions:

 

http://research.stlouisfed.org/fred2/series/USROA

 

I think they can earn 1% ROA...I peg the price between 25-30

 

If you think BOA is an average bank than that sounds reasonable.  However, if you think it is an above average bank than you should be coming up with something higher.  WFC is posting 1.4% to 1.5% right now, I believe.

 

I wonder what happened to Plan. He hasn't posted in a long time.

 

miss his insights...  :(

 

Good question. He still posts on Twitter:

 

I always appreciated his contribution too.

 

+1

 

He's one of the few people on the board that I find myself agreeing with a lot.  Also, learned a lot from his blog.

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