Bank of America: Never Ending QE Winner

NEW YORK (TheStreet) -- Bank of America (BAC) was the winner among the largest U.S. financial names on Thursday, with shares rising 5% to close at $9.40.

The Dow Jones Industrial Average rose over 200 points, or 1.6%, to close at 13.539.86, while the S&P 500 rose nearly 24 points, or 1.6%, to close at 1,459.99, after the Federal Reserve Open Market Committee announced that the central bank would purchase "additional agency mortgage-backed securities at a pace of $40 billion per month," while continuing its current securities buying program until the end of the year, "to extend the average maturity of its holdings of securities as announced in June," while "maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities."

The Fed said that it would purchase total mortgage-backed securities at a pace of roughly $85 billion per month. As expected by many economists, the Open Market Committee said that "exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015." The target federal funds rate is currently at a range 0 to 0.25%.

The KBW Bank Index (I:BKX) rose 3% with all 24 index components showing gains for the session.

Bank of America's shares have now returned 70% year-to-date, following a 58% decline during 2011. To put those numbers in perspective, the one-year total return for the shares has been 35%, while the two-year return has been a negative 32%, and the stock is down 79% for five years.

The shares trade for 0.7 times their reported June 30 tangible book value of $13.22, and for ten times the consensus 2013 EPS estimate of 91 cents, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 55 cents.

With so much at stake as the company works through mortgage repurchase claims mainly springing from its disastrous purchase of Countrywide Financial in 2008, it is no surprise to see Bank of America bounce highest after the Federal Reserve's major stimulus announcement. The company's mortgage putback claims increased by 41% during the second quarter, to $22.7 billion as of June 30.

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