저자: BullInvestor채널진행자 · 외국인
요약 보기
버핏의 두 번째 대형 보유 자산인 뱅크오브아메리카(BAC)가 장기 보유 가치가 있다는 분석 영상이다. 은행 수익 구조(대출·수수료·투자은행), 지급준비율 등 규제 환경을 설명하고, 2020년 팬데믹 영향으로 순이익이 약 910억→850억 달러로 줄었음을 짚는다. 예금 1.8조 달러 등 재무구조는 레버리지가 낮아 안정적이라고 평가한다. 경제적 해자로는 규모의 경제, 대형은행이라 '쉽게 망하지 않는' 특성, 고객 기반과 브랜드를 꼽는다. 최고경영자 브라이언 모이니핸의 경영 역량과 장기 스톡옵션 보상 구조도 긍정적으로 평가한다. 성장률은 향후 3년 연 3.5% 수준으로 가정하고, 이후 금리 및 예금 변화에 따라 1~1.5% 수준의 완만한 성장을 전제한다. 할인율은 약 6%(10년 무위험금리 1.6% 기준)로 잡았다. 내재가치는 주당 약 58달러로 추정되며 당시 주가 39달러보다 높아, 현 가격에서 장기 연 9% 수준의 수익률이 기대된다고 본다. 다만 거시경제 변수가 많아 리스크가 있으며 투자 판단은 신중해야 한다고 덧붙인다.
다듬은 글
I actually said specifically today that it will be a very long time before we sell even a single share of Bank of America. We're very pleased to have 700 million shares, and, you know, I like this business. I like the rating and I really like their management. So I think you'll see them in our assets for a long time to come.
Buffett has sold most of Berkshire's other bank stocks, but for some reason, he has not only retained his stake in Bank of America, but has also purchased nearly 100 million shares over the past year. Berkshire Hathaway owns more than 12% of Bank of America's outstanding shares. So let's examine Bank of America and see why this bank deserves to be Warren Buffett's second largest asset .
Banks make money in many different ways, but the main one is by making loans and other investments of money deposited by customers. Bank of America also makes money from fees charged to customers and from investment banking activities, such as securities trading and underwriting for companies going public.
Banks in the United States operate in one of the most regulated industries and are under the supervision of the Federal Reserve. You see, banks can't just take and lend out all the money that customers deposit. Instead, the Fed sets reserve requirements, which determine how much a bank can actually lend.
For example, the reserve requirement for Bank of America is about 10%. So, they can lend up to 90% of the money from customers' deposits. The Fed varies this requirement depending on the state of the overall economy: it raises reserve requirements when too much credit is being issued , and lowers them after an economic downturn to encourage lending.
As you can see, banks are the epitome of a cyclical industry, as they directly determine the cyclical nature of the economy. Bank of America's primary business segments are Consumer Banking, Global Wealth and Investment Management, Global Banking, and Global Markets. The bank also has an additional segment called "everything else." Consumer banking deals with mortgages, loans, personal, auto, and business loans.
GWIM is engaged in wealth management for wealthy clients and retirement accounts . Global banking includes lending and consulting services to commercial industries, as well as investing client funds in Fed funds and other comparable low-risk assets. The global markets segment is essentially the investment banking part of Bank of America, where all securities trading and market making takes place .
The bank trades on behalf of clients and uses a portion of its own deposit funds to trade securities such as public stocks and fixed income instruments. They also trade over-the-counter derivatives, such as swaps and forward contracts, to increase profits and hedge risks on existing loans and investments.
In case you're wondering, yes, these are the exact same tools that Michael Burry used to play bearish during the 2008 financial crisis . However, there is no need to worry too much about another financial collapse like in 2008. Since then, banks have been subject to extremely strict regulation by the Federal Reserve and cannot use as much of their own funds for risky bets as they did before the crisis.
You can rest easy knowing that the Federal Reserve and the U.S. government are literally breathing down the back of Bank of America's neck in everything they do. The “other ” section includes investments for hedging risks, adjustments for asset impairment, litigation costs, and investments in environmental, social, and governance policies.
Bank of America's financial performance last year predictably declined due to the effects of the pandemic. Total net income decreased slightly to approximately $85 billion in 2020 compared to $91 billion in 2019. Banks around the world have reduced new lending, and Bank of America has more than doubled its cash holdings to prepare for the challenges.
Consequently, lower consumer spending combined with low interest rates has led to falling incomes and profits. Take a look at part of the bank balance sheet . Notice how the amount of cash increased, the amount of loans decreased, and total deposits soared to almost $1.8 trillion. That's trillion with a " T".
Overall, the total liabilities are just over $2.5 trillion. No , everything is fine. I know that sounds like a large amount, but considering that over 70% of it is deposits, the situation is not that bad. Mass withdrawals are extremely unlikely, so people will not demand all the money at once. Bank of America actually has less leverage than most other banks, and they are quite conservative about reserves and risk.
This is probably one of the reasons why Buffett likes these stocks so much. Due to lower interest rates, Bank of America's net interest income fell to about 1.9% in 2020 and may remain low in the future due to Fed policy. In addition to numbers, Buffett pays significant attention to the " economic moat" and the management team of the investment object.
Bank of America is the eighth largest bank in the world, and therefore has an advantage of scale. Bank of America gets broad investment opportunities that smaller banks simply don't have . They can maintain low costs relative to total assets because they handle huge amounts of money. Another factor is that Bank of America is so large and so closely tied to consumer banking that it is effectively "too big to fail." In the extremely unlikely event of another financial crisis in our lifetime, Bank of America will certainly receive a taxpayer bailout, whether you agree with it or not.
Also, because Berkshire Hathaway is such a large shareholder, in times of trouble, a bank could sell Berkshire's convertible debt, as it did in 2011, and Buffett would buy back whatever he could get his hands on. Another advantage of Bank of America is its branding. The Bank of America brand has been around since 1998 and has more customer accounts than any other US bank.
Customers rarely take all their money and leave the bank. In fact, they usually just use the services of the bank where they are already served for their personal finances, such as mortgages, car loans, and credit cards. Therefore, a large customer base is one of the ways Bank of America fends off competition from new players in the financial sector.
Now, I'm not saying that the future belongs to traditional banks with physical branches. In fact, I would bet that fintech companies will eventually take over most of the banking sector . But for at least the next decade, Bank of America has a group of loyal, repeat customers who will almost certainly not leave the bank.
The CEO and Chairman of the Board of Bank of America is Brian Moynihan. Moynihan joined Bank of America in 2004 after a takeover and became CEO in 2010. The previous CEO made some of the worst acquisitions in financial history, and Moynihan stepped in to rebuild the bank. With significant assistance from the federal government, he proved he could rebuild a company that was in dire straits.
Buffett considers him a reliable person. I do n't know him personally , so I can't comment, but his statements and discussions with analysts seem to prove that he is transparent in his actions. The executive team receives significant compensation in the form of long-term stock options : the CEO has a base salary of $1.5 million and over $23 million in stock options.
Other executives also receive stock compensation, but nearly half of their income comes from annual bonuses. It's no secret that employees at Bank of America and other financial institutions receive high incomes, especially in the form of stocks, but I would n't say that this encourages them to make decisions in favor of the company's long-term goals.
As the economy recovers from some of the effects of the pandemic, it is logical to assume that Bank of America's revenues will grow over the next 5 years. And it is very likely that they will at least remain at the same level or increase slightly by the end of the decade. While we don't know for sure how long interest rates will stay this low, Bank of America customer deposits have increased significantly thanks to the stimulus payments.
This will likely offset any reduction in income due to lower interest rates as lending volume will be higher. I think it is unlikely that Bank of America will significantly increase the number of customer accounts , as it already dominates the US market and is unlikely to enter other global markets.
Therefore, I have forecasted revenue growth at 3.5% for the next 3 years, which is also in line with the bank's forecasts, 1.5% for the next 3 years and 1% for the last four years of this decade. These figures are slightly lower than expected US GDP growth. I set them a little lower because I don't know what the Federal Reserve will do, and deposit volume may remain flat or decline as consumers move to cheaper fintech banks.
Okay, after all that, let's determine the intrinsic value of the bank. So, 90% of Bank of America's revenue comes from the US, and the rest comes mainly from Western Europe and Asia. I weighed the equity risk premiums for these regions, factored in the bank's high credit rating, used 1.6% as the 10- year risk-free rate, and arrived at a discount rate of about 6%.
I analyzed financial statements for past years and derived an average adjusted operating margin of about 30% of revenue. I expect it to remain at this level indefinitely. I also used a reinvestment rate of 4.5% of income per year to cover real estate, equipment, and infrastructure costs. Tax rates are expected to be around 14%.
Thanks to tax benefits from the bank's significant investments in environmental projects, taking all this into account, we get an intrinsic value of about $58 per share, which is higher than the current price of $39. At current prices, I would say the market is pricing in around a 9% return over the long term through share buybacks and dividend payments from expected free cash flow.
9% is not bad, in my opinion . But according to my estimates, it's no wonder why Buffett was buying up all the available shares when they were worth about $24 a share. At this price, the shares should have provided a return of about 13% . Which is an extremely difficult task for a company like Berkshire Hathaway, and exceeds Buffett's target of 10% investment return.
But for retail investors like us, it's important to remember that there are over a thousand ways a bank can either outperform or underperform this model. The success of a bank actually depends on the macroeconomics as a whole, which has many moving elements. So you shouldn't take these risks lightly.
But if you really want to invest in Bank of America, then having Buffett's support on your side definitely won't hurt. I hope this helps. Please like and subscribe if you enjoyed it. What do you think of Buffett's second- largest investment ? Write in the comments, and see you next time.
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