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 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.
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 is down 1.80%.
- JPMorgan Chase is down 1.84%.
- Wells Fargo 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.
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Editor's note: A previous version of this article incorrectly stated that Bank of America had raised its dividend. The Fool regrets the error.
The article Why Bank of America Is Crashing -- Yet Again -- Today originally appeared on Fool.com.Fool contributor John Grgurichowns shares of Citigroup and JPMorgan Chase. Follow John's dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a simply cracking disclosure policy.
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