Bank of America Continues Partying, While Other Banks Reach for Their Wallets

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On the first trading day for the new year, the one major financial still quaffing from the New Year's Eve bottle of bubbly is Bank of America (NYSE: BAC  ) , far and away the day's big winner in terms of share price appreciation.

A pack of analysts at rival banking giant Citigroup (NYSE: C  ) kept the party going with a very bullish report on Bank of America's prospects, saying that the company "has several components to improved long-term earnings potential." 

These components include lower servicing costs for legacy mortgages, an improving environment in the capital markets, and favorable developments in interest rates. The Citi analysts are also believers in the bank's ambitious $5 billion cost-cutting plan and think it'll help juice results going forward. All of this led Citi to raise its price target on the stock to $19 per share from the former $16 -- and help lift Bank of America's shares in the day's trading.

Alas, for Citigroup, this apparently isn't the start of a virtuous recommendation cycle. Raymond James today sliced its 2013 and 2014 EPS estimates (by 3% and 5%, respectively) on the back of what it assumes will be more conservative provisioning from the bank. It wasn't a complete pan of the company, though -- Raymond James maintained its "strong buy" rating on the stock, with a target price of $62 per share.

Despite Ray's EPS haircuts, Citi's ending the day in positive territory by trading slightly higher at around $52.25 per share. What might have helped is its declaration of fresh dividends on a series of preferred stock issues, payouts that range from just over $0.36 to $29.75 apiece depending on the particular security.

Outside of that, the embryonic days of 2014 are looking much like the litigation-filled 2013 as far as the banking sector is concerned. The Federal Housing Finance Agency today revealed that seven of the nation's top financials collectively paid almost $8 billion last year in settlements to the organization. These payouts were made to help put to rest a 2011 lawsuit that the companies sold faulty mortgage bonds to Freddie Mac and Fannie Mae (NASDAQOTCBB: FNMA  ) .

The larger of those settlement amounts had already been disclosed -- most notoriously the $4 billion one from JPMorgan Chase (NYSE: JPM  ) , reached last October, and the $1.9 billion settlement reached with Deutsche Bank. But the $475 million Ally Financial will have to draw from its till, and the $250 million from Citigroup are freshly revealed details. Meanwhile, although it hadn't directly been targeted in the lawsuit, Wells Fargo (NYSE: WFC  ) is going to pony up $335 million to swerve out of the way of potential litigation.

All in all, approximately half of the financial majors are trading down in advance of market close, and half are seeing dips in their prices.

The big-picture worry for big banks? This...
The traditional bricks-and-mortar bank will soon go the way of the dodo bird -- into extinction, that is. This sounds crazy, but it's true. Every single one of the nation's biggest banks are dramatically reducing branch counts and overhauling the ones left behind. But despite these efforts, they're still far behind a single and comparatively tiny lender that's already leapt into the future. Since the beginning of 2012 alone, this company's shares are already up more than 250%. And they're bound to go higher. To download our free report revealing the identity of this stock, all you have to do is click here now.

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Eric Volkman

Eric has been writing about stocks and finance since the mid-1990s, when he lived in Prague, Czech Republic. Over the course of a varied career, he has also been a radio newscaster, an investment banker, and a bass player in a selection of rock and roll bands. A native New Yorker, he currently lives in Los Angeles.

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Related Tickers

9/2/2015 4:01 PM
BAC $15.85 Up +0.32 +2.06%
Bank of America CAPS Rating: ****
C $51.75 Up +0.81 +1.59%
Citigroup Inc CAPS Rating: ***
FNMA $2.35 Up +0.00 +0.00%
Fannie Mae CAPS Rating: **
JPM $62.57 Up +1.12 +1.82%
JPMorgan Chase & C… CAPS Rating: ****
WFC $51.99 Up +1.00 +1.96%
Wells Fargo CAPS Rating: *****