Outside Topic OT - BofA and Germany - Printable Version
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RE: OT - BofA and Germany - Mick - 11-27-2024
As of Q1, 2024, BofA had estimated unrealized losses in their HTM (Hold to Maturity) T-Bond portfolio of $110 billion. That's a $110 billion loss up from a $98 billion unrealized loss in Q4, 2023. This, on a $595 billion portfolio. This is related to the issue that sunk SVB. No, it's not nearly as bad. But it ain't good.
Bank of America’s paper loss on its bond portfolio reaches $110 bln and outpaces other banks: report - MarketWatch
As of Q3, 2024 the loss has increased to $131.6 billion. JP Morgan Chase's unrealized losses in the same category were $20 billion
Bank of America's unrealized losses on securities rose to $131.6 bln in Q3
RE: OT - BofA and Germany - TonyLima - 11-27-2024
(07-03-2023, 06:58 AM)winflop Wrote:(07-02-2023, 10:23 AM)French Rage Wrote: It's only a loss if they sell now. Unlike smaller banks, BAC should (in theory) have diverse enough of a deposit base and overall business that they don't need to be selling right now.
That is not correct. All investments need to be adjusted to current market values on the balance sheet ("marked to market"), and federal regulators look at the market value of assets when assessing systemic risk. Any devaluation of this magnitude will materially impact their balance sheet and their systemic risk of failure
Hoo boy, is that wrong. Mark to market requirement depends on myriad regulations. Each coutry gets to have their own set.
RE: OT - BofA and Germany - Mick - 11-28-2024
(11-27-2024, 09:19 PM)TonyLima Wrote:(07-03-2023, 06:58 AM)winflop Wrote:(07-02-2023, 10:23 AM)French Rage Wrote: It's only a loss if they sell now. Unlike smaller banks, BAC should (in theory) have diverse enough of a deposit base and overall business that they don't need to be selling right now.
That is not correct. All investments need to be adjusted to current market values on the balance sheet ("marked to market"), and federal regulators look at the market value of assets when assessing systemic risk. Any devaluation of this magnitude will materially impact their balance sheet and their systemic risk of failure
Hoo boy, is that wrong. Mark to market requirement depends on myriad regulations. Each coutry gets to have their own set.
Right. Banks hold bonds in a "mixed measurement model" consisting of two accounts:
(1) AFS or "Available For Sale". These are bonds that are available to be sold and must be valued at Mark-to-Market, per FASB 157.
(2) HTM or "Held to Maturity" (sometimes referred to as "Hide to Maturity"). These bonds, not available for sale, are held to maturity and are amortized instruments. The loss goes unrealized until the maturity date. BofA's unrealized securities loss at the end of Q3 was $131.6 billion, up from $106 billion at the end of Q2, so...not so good.
Bank of America's unrealized losses on securities rose to $131.6 bln in Q3
As for the AFS vs. HTM accounts, I think that dates from FASB decisions made shortly after the financial crisis in 2010. I used to work with Bob Herz, a partner at PwC, who became FASB's chair -- also a dead ringer for Paul Giamatti. Bob was an absolute champion for market value. He resigned when FASB -- under political pressure -- retreated from Herz's proposal to require all financial instruments to be valued at market value on the balance sheet.
Another relevant Financial Accounting Standards Board (FASB) Statement 115, summarized here: Summary of Statement No. 115.
With respect to eliminating HTM status, it isn't for lack of trying. Institutional investors were hoping FASB would address it at their December, 2023 meeting, but wasn't to be. And because I know you don't get to read enough about accounting:
FASB Decision Not to Consider Eliminating Held-to-Maturity for Debt Securities Disappoints Investor Advocates
RE: OT - BofA and Germany - TonyLima - 11-28-2024
(07-02-2023, 08:05 AM)OutsiderFan Wrote: PSA: Twitter no longer allows content to be seen by opening a link without logging in. So if you want people who don't have Twitter accounts to see what you are referring to on Twitter, you must embed tweets on this board like so:
[tweet]https://twitter.com/BossBlunts1/status/1675201131088150528[/tweet]
Great tip! Thanks.
(11-28-2024, 09:40 AM)Mick Wrote:(11-27-2024, 09:19 PM)TonyLima Wrote:(07-03-2023, 06:58 AM)winflop Wrote:(07-02-2023, 10:23 AM)French Rage Wrote: It's only a loss if they sell now. Unlike smaller banks, BAC should (in theory) have diverse enough of a deposit base and overall business that they don't need to be selling right now.
That is not correct. All investments need to be adjusted to current market values on the balance sheet ("marked to market"), and federal regulators look at the market value of assets when assessing systemic risk. Any devaluation of this magnitude will materially impact their balance sheet and their systemic risk of failure
Hoo boy, is that wrong. Mark to market requirement depends on myriad regulations. Each coutry gets to have their own set.
Right. Banks hold bonds in a "mixed measurement model" consisting of two accounts:
(1) AFS or "Available For Sale". These are bonds that are available to be sold and must be valued at Mark-to-Market, per FASB 157.
(2) HTM or "Held to Maturity" (sometimes referred to as "Hide to Maturity"). These bonds, not available for sale, are held to maturity and are amortized instruments. The loss goes unrealized until the maturity date. BofA's unrealized securities loss at the end of Q3 was $131.6 billion, up from $106 billion at the end of Q2, so...not so good.
Bank of America's unrealized losses on securities rose to $131.6 bln in Q3
As for the AFS vs. HTM accounts, I think that dates from FASB decisions made shortly after the financial crisis in 2010. I used to work with Bob Herz, a partner at PwC, who became FASB's chair -- also a dead ringer for Paul Giamatti. Bob was an absolute champion for market value. He resigned when FASB -- under political pressure -- retreated from Herz's proposal to require all financial instruments to be valued at market value on the balance sheet.
Another relevant Financial Accounting Standards Board (FASB) Statement 115, summarized here: Summary of Statement No. 115.
With respect to eliminating HTM status, it isn't for lack of trying. Institutional investors were hoping FASB would address it at their December, 2023 meeting, but wasn't to be. And because I know you don't get to read enough about accounting:
FASB Decision Not to Consider Eliminating Held-to-Maturity for Debt Securities Disappoints Investor Advocates
The incredible diversity of experience and expertise in these parts never ceases to amaze me. One of my graduate fields was monetary theory. I knew some of the above, but not the details. Thank you.
(07-02-2023, 05:14 AM)rogpodge Wrote: https://twitter.com/BossBlunts1/status/1675201131088150528
Bank of America facing the devaluation and illiquidity of $100B in US bonds. In the previous charts I posted, their exposure was the highest among the big four banks.
On a separate note, worldwide adoption of quantitative easing will potentially collapse the German central bank, causing inflation and economic instability while a war rages nearby. France and now Belgium are dealing with rioting. Interesting times.
Idiotic German economic policies are already wrecking their economy. The collapse of the Bundesbank will hasten an inevitable event.
RE: OT - BofA and Germany - Mick - 01-10-2025
(07-02-2023, 05:14 AM)rogpodge Wrote: https://twitter.com/BossBlunts1/status/1675201131088150528
Bank of America facing the devaluation and illiquidity of $100B in US bonds. In the previous charts I posted, their exposure was the highest among the big four banks.
On a separate note, worldwide adoption of quantitative easing will potentially collapse the German central bank, causing inflation and economic instability while a war rages nearby. France and now Belgium are dealing with rioting. Interesting times.
Chickens are coming home to roost, as you pointed out Rog.
Bank of America Braces for Massive Bond Losses as Yields Soar
Interesting points:
- Since bond yields are up, bond prices are down, losses are up.
- BofA easily the most exposed bank with $111 bils. in paper losses on 6/30/24.
- This is a major reason why SVB failed
- Industrywide bond losses could top $500 bils., up from $364 bils. at the end of last quarter.
- BofA's stock still booming, up 35% in last 12 months, 23 analysts still average a "buy" rating.
RE: OT - BofA and Germany - Mick - 01-13-2025
For context, please note that Bank of America's equity -- how much it is worth on the balance sheet -- is $296.5 billion. Barron's is reporing a potential loss of $111 billion, which was the loss 6.5 months ago, based upon BofA's June balance sheet. So the potenial loss is a substantial portion of their equity. But they clearly intend to draw it out over the long run. My guess is that SVB probably intended something similar.
Here's their presentation from their Q3 call. Shows $568 bils. in Hold to Maturity bonds, which are not marked to market. And if you look at the prior two quarters, the bank obviously intends to wind down about $9 bils. per quarter, so they'll manage their losses over the long term:
3Q24 Earnings Presentation_ADA
B of A will report Q4/2024 earnings on a listen-only con call in three days. My guess is that their HTM holdings will be in the $559 bils. to $561 bils. range.
RE: OT - BofA and Germany - Mick - 10-09-2025
(01-13-2025, 11:03 AM)Mick Wrote: For context, please note that Bank of America's equity -- how much it is worth on the balance sheet -- is $296.5 billion. Barron's is reporing a potential loss of $111 billion, which was the loss 6.5 months ago, based upon BofA's June balance sheet. So the potenial loss is a substantial portion of their equity. But they clearly intend to draw it out over the long run. My guess is that SVB probably intended something similar.
Here's their presentation from their Q3 call. Shows $568 bils. in Hold to Maturity bonds, which are not marked to market. And if you look at the prior two quarters, the bank obviously intends to wind down about $9 bils. per quarter, so they'll manage their losses over the long term:
3Q24 Earnings Presentation_ADA
B of A will report Q4/2024 earnings on a listen-only con call in three days. My guess is that their HTM holdings will be in the $559 bils. to $561 bils. range.
In case you own stock in one of the "too big to fail" banks, here are their gross unrealized bond losses in their hold-to-maturity accounts as of June 30, 2025:
Bank of America, $93.145B
JPMorgan Chase, $21.392B
Citigroup, $14.102B
Wells Fargo, $37.836B
Their aggregate unrealized losses were $172.28 billion as of March 31, 2025 and they've paid it down to $166.475 billion, so...baby steps.
RE: OT - BofA and Germany - rogpodge - 10-16-2025
https://www.reuters.com/business/us-regional-bank-stocks-hit-by-zions-charge-off-fraud-allegations-2025-10-16/
https://www.cnbc.com/2025/10/16/regional-banks-and-jefferies-shares-tank-as-concerns-grow-on-wall-street-about-sour-loans.html
Western Alliance Bancorp, too. They'll probably get bailed out.
RE: OT - BofA and Germany - Mick - 10-16-2025
When Silicon Valley Bank failed, they had gross unrealized Hold to Maturity (HTM) bond losses of about $15 billion against total equity of $16.3 billion. When combined with the additional $1.8 billion loss in SVB's Available for Sale (AFS) securities portfolio, total unrealized securities losses exceeded 100% of Tier 1 capital. Also, SVB had over 40% of its assets classified as HTM, double the industry norm. At the time, sector-wide unrealized securities losses stood at $515 billion when SVB failed, peaking at $684 billion later in 2023.
Today, U. S. aggregate unrealized securities losses have declined to $395 billion (approximately) and represents 7% to 8% of Tier 1 equity. Only 16 banks report unbooked HTM losses exceeding 50% of CET1 capital, down from 24 banks in Q1'25 and 34 in Q4'24, so conditions are improving. It will really help if the Fed continues to reduce rates.
I reviewed the top 20 underperforming banks. If you want the list, PM me.
RE: OT - BofA and Germany - BostonCard - 10-16-2025
https://www.wsj.com/finance/banking/new-credit-fraud-fears-raise-more-worries-about-regional-banks-0fe42593?st=Tjjoup&reflink=desktopwebshare_permalink
As if banks don’t have enough to worry about…
BC