Why Your BofA Fixation’s a Bad Idea: After a Stock Bounce, Still a Second-Rate Bank
It’s only natural to fixate on Bank of America (BAC), the giant bank trading at about $8 now, down from $50 before the economic crisis. But remember, BofA’s shares outstanding are up 127% during that period; so $50 is a more distant than it might seem. Generally, we should get over it BofA. Yes, its shares will at some point provide a nice bounce. But after that, you’ll own a mediocre performer. Running a bank to produce top-notch return on assets takes an iron will from top-to-bottom, and a culture of excellence. You see it in the superior returns Wells Fargo (WFC) and US Bank (USB) have produced – and will produce again. Citigroup (C) and JP Morgan (JPM), with their big investment banking operations, carry lots of risk.
Filed under: Company Analysis