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BANK OF AMERICA (BAC)
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Bank of America : These Bank of America Warrants Are Finally Worth Something

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01/13/2018 | 04:44pm CEST
By Rachel Louise Ensign 

It seemed so unlikely a few years ago that investors weren't willing to bet a dime on it. But on Friday, Bank of America's stock price reached $30.79.

That was the price Bank of America's stock needed to hit for some esoteric securities to have any value. These securities, known as Bank of America TARP "B" warrants, had been bought by a varied group of investors ranging from hedge-fund managers like John Paulson to the Michigan Department of Treasury.

Now, some are sitting on eye-popping gains.

Yet it was a bet few had the stomach for -- even less than two years ago when the bank's stock was reeling. In 2016, with Bank of America shares trading for much of that year below $15, the warrants traded for as little as 7 cents.

The warrant price reflected investor views that there was little chance Bank of America stock would ever reach the $30.79 strike price.

But since that year's presidential election, Bank of America's stock has been on a tear as rising interest rates and tax cuts helped profits and the bank put legal and credit issues behind it. Earlier this month, the lender's stock crossed the $30 mark for the first time since 2008. On Friday, the shares closed at $31.19.

Over the last 12 months, the bank's shares have risen 36%, the most of any big bank.

The warrants have done even better: they are up more than 4000% since their low in August 2016. They now trade at $2.86.

The warrants were originally issued to the government during the 2008 bank bailout. Many of them from a variety of banks were later auctioned off to private investors.

Essentially, for these buyers, the warrants were like lottery tickets. If the stock stayed below the strike price, the warrant would end up worthless. If it rose above the strike, big gains could be in store.

Investors have until October 2018 to redeem the Bank of America B warrants before they expire.

Bank of America reports earnings next Wednesday.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

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Financials ($)
Sales 2018 91 903 M
EBIT 2018 37 330 M
Net income 2018 26 164 M
Debt 2018 -
Yield 2018 1,73%
P/E ratio 2018 12,26
P/E ratio 2019 10,76
Capi. / Sales 2018 3,39x
Capi. / Sales 2019 3,24x
Capitalization 312 B
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Technical analysis trends BANK OF AMERICA
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 34,0 $
Spread / Average Target 9,0%
EPS Revisions
Managers
NameTitle
Brian T. Moynihan Chairman, President & Chief Executive Officer
Catherine P. Bessant Co-COO & Chief Technology Officer
Thomas Kell Montag Co-Chief Operating Officer
Paul M. Donofrio Chief Financial Officer
Thomas J. May Independent Director
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