Bank of America (NYSE: BAC) is expected to report highly disappointing financial results Thursday morning, a development that -- as has been the case in the past -- will provide plenty of schadenfreude to the company's vociferous and numerous critics.
Analysts surveyed by Thomson Reuters expect Bank of America to report a loss of 3 cents per share, as opposed to earnings of 17 cents a year ago, on greatly reduced revenues of $22.51 billion, compared to $26.88 billion a year ago.
Excluding special accounting-related charges, which are expected to weigh heavily on many U.S. banks this quarter, analysts see Bank of America making a profit of 12 cents per share. The Charlotte, N.C.-based bank is one of the few expected to fare worse in the just-ended quarter than it did in the last three months of 2011, which were catastrophic for the income statements of nearly all financial services firms.
In some ways it is not as bad at the moment for Bank of America as it was near the end of last year, when a retail banking PR fiasco was followed by plummeting stock prices. Since then, shares have doubled from lows near $5 in late December to a recent range of $8 to $9. Yet the company continues to be the whipping boy of Wall Street. Matt Taibbi, an influential writer known for his eviscerating, irreverent and caustic profiles of the financial industry, recently penned an article that described the bank as "a hypergluttonous ward of the state whose limitless fraud and criminal conspiracies we'll all be paying for until the end of time."
Even Wall Street analysts who suggest the company is undervalued are having a hard time coming up with kind words to describe the company.
In a recent note, analyst Brennan Hawken of UBS noted that "the company is far from out of the woods in its mortgage exposures" and added, "We are concerned about BAC's ability to generate adequate returns in the near term." The best things Hawken said concerning BofA described the company's past and possible future.
"We believe BAC is an attractive stock holding if management is able to execute through its headwinds," he wrote.
What The Experts Are Looking For
It seems that on Thursday morning, then, analysts will be looking to gauge not just whether earnings will be bad, but just how bad they will be.
The wild card in the mix will be charges related to lawsuit provisions, as the bank continues to be sued by all manner of stake-holders in mortgage-backed securities products. Litigation-related costs at the bank ballooned over 800 percent last year.
Another key factor will be whether the bank has been able to cut costs as revenues slide. While many banks are trying to rein in expenses, first-quarter results have shown that some competitors, including Citigroup Inc. (NYSE: C), are having trouble putting their cost-cutting plans into action.
"We think the primary focus should be on expenses," analysts at St. Louis-based investment firm Stifel Nicolaus wrote in a recent note to clients. "We think it is critical for the company to reach the $16 billion quarterly expense base in order for investors to believe in the company's earnings power story over time," they wrote.
A final issue: Just how big will the special accounting charges be? A specific write-off, which happens against the business cycle whenever the market confidence surrounding Bank of America's bonds improves, could be as large as $4.1 billion, according to Matthew Burnell of Wells Fargo Securities.
Shares of Bank of America fell six cents to $8.86 in morning trading.