Why Bank of America Is Crashing -- Yet Again -- Today

Buckle up, Fools. The last few weeks have been a real roller coaster ride not just for Bank of America (NYSE: BAC  ) but for its big-four brethren, too. And if the start of the day's trading is any indication, it looks like the ride is going to continue.

Big-four roundup
Here's a look at where B of A and its peers are shaking out as the market opens:

  • B of A is already down 1.54%.
  • Citigroup (NYSE: C  ) is down 1.80%.
  • JPMorgan Chase (NYSE: JPM  ) is down 1.84%.
  • Wells Fargo (NYSE: WFC  ) is down 0.75%.

Long-term thinking, knee-jerk reaction?
Two weeks ago today, B of A released its first-quarter earnings. To the surprise of many, including this B of A bear, earnings were overall good and contained some real highlights: like revenue growth of 5% year over year, while banks like JPMorgan and Wells Fargo reported year-over-year revenue declines. Everyone likes net-income growth, but when it comes solely from cost-cutting, it's not sustainable.

Yet B of A missed analyst expectations for earnings-per-share by $0.02, which sent B of A and the rest of the big four into a tailspin. They all recovered eventually, but it's been a bumpy, up-one-day-down-the-next kind of ride. Today it looks like the bump will be down, and it will be a big one.

Is there anything else going on with B of A that might be sending its share price down? The superbank did announce its quarterly dividend yesterday, of $0.01 per share: the same dividend the bank's been paying for years now. Maybe investors feel insulted and are driving the share price down today as a result. If they do, perhaps they should feel buoyed instead.

Rather than increasing the quarterly dividend, which always curries favor with investors, B of A is holding onto that capital and therefore strengthening its balance sheet. Citi CEO Michael Corbat pulled a similar move recently for his bank in the wake of a strong 2013 stress-test performance, and it's one I applaud him for. 

Of course, B of A's downward path today may be nothing more than the normal short-term gyrations that are a part of any market's short-term operation. Just keep your eye on the long term, Fools, and you'll come out ahead in the end. 

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Editor’s note: A previous version of this article incorrectly stated that Bank of America had raised its dividend. The Fool regrets the error.

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Read/Post Comments (18) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 01, 2013, at 11:54 AM, mare99 wrote:

    Crashing ???? I had no idea it is crashing.

    Anyway, very insightful comment. Thank you

  • Report this Comment On May 01, 2013, at 12:15 PM, oxyfilters wrote:

    Insightful??? Hardly. More like confusing.

    The writer calls himself a bear, and finishes by encouraging buying.

    Thanks

  • Report this Comment On May 01, 2013, at 12:28 PM, dmeckeln wrote:

    The one cent dividend is not an increase. It's been in place for several years, ever since the 2008 crash.

  • Report this Comment On May 01, 2013, at 12:36 PM, TMFKopp wrote:

    @dmeckeln

    You are correct. We're in the process of getting this updated, thanks for the comment!

    Matt

  • Report this Comment On May 01, 2013, at 12:49 PM, reefrocket wrote:

    Why not just let them fail. They are the one's that caused this fiasco in the first place. Also, as far as I'M concerned, I think that ANYBODY working for a ban should be imprisoned for their support of these "corporations". They work there, therefore they support the policies of these institutions, they should ALL go to jail. Do NOT PASS the buck, GO TO JAIL. ALL of you are THIEVES!

  • Report this Comment On May 01, 2013, at 1:34 PM, jaybenyo2013 wrote:

    crashing? its down 1.5% and the market is down 100 pts or so and it has a beta of 1.78. its part of the dow and s and p.

    what would you except it to be today ?? UP ???

    your headline is irresponsible and idiotic

  • Report this Comment On May 01, 2013, at 1:46 PM, justssayin wrote:

    When a company makes the customer feel less important than what they can make off of them, business tends to go down.

  • Report this Comment On May 01, 2013, at 1:51 PM, misakowalt wrote:

    BofA is the worst bank for customer service. We banked with them until 2002 when we could not get response to letters, sudden fees were charged with no explanation, and when our local BofA branch office tried get resolution, even they were unsuccessful. We closed our accounts and never looked back.

    Since then we have come across numerous people who took their business elsewhere. BofA needs to finally fall a permanent death. Let them go and bury them where they fall!

  • Report this Comment On May 01, 2013, at 2:05 PM, multi007 wrote:

    Very misleading title. It seems more and more clear that Fool is publishing nonsensical articles on BAC just to get them listed on the news wires only to generate page views...

    BAC is not crashing. The market is down. BAC is lagging less than its peers. BAC long term is a buy. Anaylists already rated it a buy with $16 to $20 price target. Too many shorts still trying to push the stock lower. Near term, perhaps. Long term, cant stop the bank train.

  • Report this Comment On May 01, 2013, at 3:20 PM, JMMTMM wrote:

    I heard that B of A recently lost a huge business account in NV to a competitive bank of equal size. As a result they are wrongfully terminating older employees and those with seniority to reduce overhead. Facts are they treat their customers and employees like %6&#! Go into one of their branches for one simple transaction and the managers make their bankers try and sell sell sell! Total BS! TAKE YOUR MONEY to a local credit union.

  • Report this Comment On May 01, 2013, at 5:38 PM, bbkty wrote:

    I thought it already crashed. I guess it's too big to fail. At taxpayers' expense.

  • Report this Comment On May 01, 2013, at 9:27 PM, notsoblind wrote:

    They shouldn't have refused to loan money to gun manufactures,at the behest of Rahm Emanuel..

    The price you pay for playing with the progressives...

  • Report this Comment On May 01, 2013, at 9:36 PM, VegasSmitty wrote:

    The Motley Fool. They sure named it right, seems all the writers are fools!

  • Report this Comment On May 01, 2013, at 9:44 PM, spantini wrote:

    Let me know when BoA drops to $1.00 -- I was with a young lady at our local BoA this afternoon. They had mailed her new debit card to the wrong address. She had them issue her a new 'temporary' card - they were gracious enough to charge her a $5.00 fee. Then she was told to cancel her original card (never received) and have a new 'permanent' card reissued - two additional $5.00 fees. All this resulting from THEIR error!

    Let me know when BoA hits .25

  • Report this Comment On May 01, 2013, at 11:43 PM, quasimodo007 wrote:

    GREED and Corruption is their Motto. Bet their CEO still get Huge bonuses and pay and now TAX Free Paid Perks.

    just like the evil polluters koch brothers and their bought and paid for Tea party and the evil GOP Congress and their mafia style Privilege Crooks of Wall street. THE GREAT American RIP OFF on the POOR American Peons.

  • Report this Comment On May 02, 2013, at 12:01 AM, bookiz wrote:

    I'd rather trade penny stocks than investing in BAC stocks... I make I check pumptodump.com/ daily watch list before I buy a penny stock to make sure it's a pump and dump.

  • Report this Comment On May 02, 2013, at 1:04 AM, Hngnthweb wrote:

    Maybe you BOA Bunch Of A$$holes should kiss our A$$ on the Second Amendment, along with Wells Fargo and CitiIdiots. You will never have to worry about making money off me, I will pay cash first. Enjoy the ride to bankruptcy under Obama...the rest of us are.

  • Report this Comment On May 29, 2013, at 9:12 PM, bookiz wrote:

    Sooner or later BOA will go down again. Is it a good idea to trade pump and dump penny stocks? www.pennystockipedia.com

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