Bank of America (BAC) reported earnings today that modestly exceeded analyst consensus estimates. However, as we noted in April (Shulmaven: Winter Comes to the Bank Stocks), BAC was suffering from huge embedded mark-to-market losses on its held to maturity securities holdings which amounted to $108 billion at yearend 2022. Today BAC reported those losses, as of the end of the third quarter, increased to $132 billion on a cost basis of $603 billion, not chump change.
The bank also reported that its tangible book value per share was $23.79. The $132 billion in embedded losses amounts to $16.35/share. Thus the true tangible book value would be a meagre $7.44/share. With BAC stock trading this morning at $27.15, it is being valued at a very pricey 3.6X "true" tangible book value. To me this means, that unless interest rates fall dramatically, BAC's share price will be weighed down for years.
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