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Ascend Capital’s Increased Position in Bank Of America

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Ascend Capital and Bank of America

Ascend Capital increased its position in Bank of America (BAC) by over $18 million in the stock. It represented 1.11% of the total portfolio in 4Q14—up from 0.32% in the third quarter.

Bank of America is part of the Financial Select Sector SPDR Fund (XLF). It accounts for 6.67% of the ETF. Bank of America also accounts for 0.88% of the iShares Core S&P 500 ETF (IVV). The hedge fund increased its positions in other financial firms like Capital One Financial (COF) and Invesco (IVZ).

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About Bank of America

Bank of America is the second largest bank in the US. It has assets of $2.1 trillion. It has ~48 million consumer and small business relationships in the US. It does business in more than 40 countries and jurisdictions.

Bank of America offers a full range of banking and non-banking services—including commercial banking, corporate and investment banking, wealth and investment management, research services, and other services. It operates through the following five major segments:

  • Consumer and Business Banking
  • Consumer Real Estate Services
  • Global Wealth and Investment Management
  • Global Banking
  • Global Markets

4Q14 results – revenue declines

In 4Q14, Bank of America’s total revenue, net of interest expense, fell 14% YoY (year-over-year) or by $2.7 billion to $18.9 billion. This was mainly due to lower yields. Since most of the company’s revenue-producing assets are linked to market interest movements, the top line tends to fluctuate along with it.

Profitability also suffered. In 4Q14, the net income was $3.1 billion. It was down from $3.4 billion in 4Q13.

Asset quality metrics improve

On a positive note, Bank of America reduced its non-interest expenses during the year by nearly $3.1 billion. The number of loans delinquent beyond 60 days decreased from 325,000 in 4Q13 to 189,000. This helped reduce some of the impact on its bottom line.

In addition, the company’s credit quality improved during the quarter. Provisions for credit losses fell by $117 million from 4Q13 to $219 million in 4Q14. Net charge-offs declined by nearly 44% from 4Q13 to $703 million in 4Q14. The 0.40% charge-off ratio was the lowest in a decade. The decline in charge-offs was due to improvements in its portfolio trends, particularly increased home prices.

In the next part of this series, we’ll discuss Ascend Capital’s position in Honeywell.

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