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!

Bank of America: Economic Winner

NEW YORK (TheStreet) -- Bank of America (BAC) was the winner among the largest U.S. banks on Friday, with shares rising 3.5% to close at $11.71, on signs the U.S. economy is improving.

The KBW Bank Index (I:BKX) climbed 2% to close at 54.73, after the Bureau of Labor Statistics said non-farm payrolls in the U.S. grew by 157,000 during January, which was down from 196,000 in December. The unemployment rate edged up slightly to 7.9% from 7.8%.

Economists, on average, had expected 160,000 non-farm jobs to be added during January, with the unemployment remaining at 7.8%, according to Briefing.com.

A notable item in the Bureau of Labor Statistics report was the significant revisions of previous months' jobs-growth numbers. The number for November was revised to 247,000 from 161,000, while the December number was revised by 41,000 from 155,000. The office said the numbers were "revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors."

While there have been a number of notable disappointments so far this earnings season, FactSet said on Friday that "of the 234 companies that have reported earnings to date for the fourth quarter, 70% have reported earnings above estimates." That percentage has been pretty much the same for the past four quarters, however. FactSet also said that "in terms of revenues, 67% of companies have reported sales above estimates. This percentage is well above the average of 50% recorded over the past four quarters."

Bank of America


Bank of America's shares have had a flat return so far this year, trailing the KBW Bank Index's increase of 7%. But during 2012, Bank of America's stock returned 110%, while the index was up 30%. Bank of America's shares still haven't fully recovered from their epic drop of 58% during 2011. The shares are now down 11% since the end of 2010.

The stock trades for 0.9 times their reported Dec. 31 tangible book value of $13.36, and for 9.2 times the consensus 2014 earnings estimate of $1.28 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is 97 cents.

Bank of America was one of the "disappointments" this earnings season, reporting a fourth-quarter profit of just $700 million, or three cents a share. The company had pre-announced a large mortgage putback settlement with Fannie Mae (FNMA) and a major contribution to the $8.5 billion foreclosure settlement between federal regulators and the nation's largest loan servicers.

Then again, Friday's action for the shares reflects how much is at stake for the company in an improving economy. Investors' mortgage repurchase claims against the company rose to $28.3 billion as of Dec. 31 from $25.5 billion the previous quarter. Bank of Americas fourth-quarter presentation implied that the Fannie Mae settlement would reduce the putback claims by roughly $12.2 billion, leaving about $16.1 billion in putback claims. That is still quite a sum, and every new report showing continued improvement in home prices makes investors more comfortable about the company's ability to absorb the punishment.

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 16,533.76 -29.54 -0.18%
S&P 500 1,933.38 +2.71 0.14%
NASDAQ 4,368.28 -1.4930 -0.03%

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