By Sital S. Patel
Bank of America Corp. (BAC) is scheduled to release
third-quarter results before the bell on Wednesday. Here's what you
need to know:
EARNINGS FORECAST: The second-biggest U.S. bank by assets is
expected to report a third-quarter loss of 9 cents a share,
compared to a profit of 20 cents a share in the same quarter the
year before, according to analysts surveyed by FactSet. The loss
includes an expected charge of 43 cents a share tied to the bank's
$16 billion mortgage settlement with the government in August.
REVENUE FORECAST: The bank is expected to report a decline in
revenue. The consensus estimate is for revenue of $21.34 billion
for the quarter, compared to $21.53 billion a year ago.
STOCK REACTION: Shares have gained nearly 5.5% so far in 2014
through Monday, but are 9% below their 52-week high of $18.03 a
share. Shares have beaten the Financial Select Sector SPDR Fund,
which tracks financial stocks in the S&P 500, and is up 2.4%
year-to-date. Analysts have an average price target on the stock of
$17.85, according to analysts surveyed by FactSet.
WHAT TO WATCH:
--LAW AND ORDER: The Charlotte, N.C.-based bank paid $16 billion
in a settlement with the Justice Department and some individual
states in August over its handling of bad mortgage securities
related to the financial crisis. This latest settlement should put
most of the bank's legal troubles behind it, with CFO Bruce
Thompson calling it an important milestone for the bank. Investors
will be closely watching for any comments from management regarding
any remaining legal issues.
--CAPITAL PLANNING: Bank of America resubmitted its capital plan
to the Federal Reserve in May, after it announced a capital error
of $4 billion because of an accounting issue. The bank originally
had requested a dividend payout of 5 cents a share, but it did not
include a share repurchase plan in the resubmitted plan. Analysts
are expecting a share repurchase request to appear in the next
submission, which is coming up in January, and they will pay
attention to any comments from management on use of capital.
--LOANS AND JOBS: Analysts are expecting the bank to continue to
grow its loan book and to improve net interest income. They also
are expecting more of the bank's loan-loss reserves to be released.
In addition, they expect an update on the bank's cost-cutting
plans, after it shed 31,000 full-time jobs in the past few years
and announced planned cuts of $1 billion for each quarter of 2014
and $500 million per quarter of 2015.
-Sital S. Patel; @Sital; AskNewswires@dowjones.com
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