Bank of America's shares returned 69% year-to-date, through Tuesday's close at $9.36. Even after this year's run-up, the shares remain discounted at 0.7 times their reported Sept. 30 tangible book value of $13.48, but they also trade for the highest forward P/E among the "big four" U.S. banks, at 9.9 times the consensus 2013 EPS estimate. Ramsden said that Bank of America's "valuation appears reflective."
Of course, Bank of America's earnings can take another big hit at any time, and the company also faces the lingering headline risk associated with investors' mortgage putback demands, and other actions associated with the company's purchase of Countrywide Financial in 2008.
The company is a political pin-cushion, especially in the middle of election season. The Department of Justice on Wednesday filed a civil complaint against Bank of America, alleging that "Countrywide and later Bank of America, following the acquisition of Countrywide in 2008, implemented a new origination process called 'Hustle,' which was intentionally designed to process loans at high speed and without quality checkpoints, and which generated thousands of fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae (FNMA) and Freddie Mac (FMCC) that later defaulted causing over $1 billion dollars in losses and countless foreclosures."
The tone-deafness in naming an accelerated mortgage loan approval process "Hustle," shows just how out-of-control the mortgage lending business was, during the real estate bubble.So what does all this mean to the investor? It depends on your investment horizon. Long-term investors could see a very nice buying opportunity this quarter, and not only Citi, JPMorgan and Wells Fargo.