This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

For Bank of America, It's About Cost Cuts, Not Growth

NEW YORK (TheStreet) -- Bank of America (BAC) is set to report fourth-quarter earnings Thursday morning, and investors will be looking for signs the bank is beginning to make progress with much-anticipated cost cuts.

Analysts are looking for Bank of America to earn 2 cents per share, which is flat with the third quarter and below the 15 earned a year earlier.

Cost cuts are a big part of the bullish argument for the bank's shares.

Atlantic Equities analyst Richard Staite calculates Bank of America can save $10 billion in annual costs as the housing market recovers and it can shut down a division known as Legacy Asset Servicing that focuses on delinquent home loans. He calculates another $8 billion in savings from a program known as "new BAC." Staite upgraded Bank of America Oct. 24 when the shares were at $9.36, upping his price target to $12 from $8. The bank's shares passed that target Jan. 2, and took a tumble a week later after Credit Suisse analyst Moshe Orenbuch argued they had gone too far, too fast.

"Current valuation appears to be ahead of the company's near- to intermediate-term performance and appears to be discounting significantly faster improvements in efficiency than we would be expecting," Orenbuch wrote as he downgraded the bank's shares to "neutral" from "outperform."

In the same report, Orenbuch allowed that Bank of America could surprise him by showing an additional 5% improvement in its efficiency ratio, which would be equivalent to 30 cents per share. However, he notes this would be 40% of the anticipated cost reductions from the Legacy Asset Servicing division. He believes it will take until 2015 for the bank to reach that goal.

Revenues have been a big challenge for Bank of America, which has been selling off and winding down a substantial chunk of its businesses. Bank of America sold its Canadian credit card business for $8 billion in 2011, along with a $2.5 billion stake in money manager BlackRock. It has also been selling off its mortgage servicing business. Last week, it announced the sale of servicing rights on $306 billion worth of mortgages, about 20% of the bank's total servicing portfolio, according to Orenbuch, who believes it will unload more of such assets.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,960.57 -123.23 -0.72%
S&P 500 1,978.34 -9.64 -0.48%
NASDAQ 4,449.5640 -22.5440 -0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs