Unresolved mortgage repurchase demands against Bank of America totaled $16.648 billion as of June 30, down from $17.135 billion the previous quarter, mainly reflecting a settlement with bond insurer MBIA ( MBI). Even though $16.648 billion is a very large figure, the company "estimates that the range of possible loss for representations and warranties exposures could be up to $4 billion over accruals at June 30, 2013," according to its second-quarter 10-Q filing. "We do not currently have an EPS estimate beyond or 2014 estimate of $1.38," Mutascio wrote. "However, if we were to assume annual operating expenses were to fall to $57.0-$58.5 billion from our 2014 estimate of $61.4 billion (assumes the potential for some natural expense creep), then
the LAS savings would represent a $0.17-$0.25 EPS benefit." "The timing of the full EPS impact would seem to be a 2016 event since Legacy Asset Servicing costs are not expected to normalize at $500 million per quarter until 4Q15," Mutascio added. Looking beyond the LAS cost savings, based on Thompson's comments, "one could build the company's annual net interest income from $41.6 billion in 2Q13 to approximately $45.8 billion with the benefit of higher long-term rates ($1.0 billion with a 100 bps increase), a parallel shift in the curve ($2.3 billion with a 100 bps parallel shift) and the repayment of long term debt ($875 million if $35 billion in debt matures net of issuances)," according to Mutascio. He added "this does not take into account any balance sheet growth."