(Written by Alexander Crawford. Data sourced from Fidelity.)
Bank of America (BAC) said on Monday it would cut 30,000 jobs over the next several years and reduce annual expenses by $5 billion, but investors appeared unimpressed with the stock hardly budging.
This news comes during a very tumultuous time for Bank of America, whose stock has fallen almost 50% year-to-date as analysts speculate on lingering mortgage liabilities and new legal troubles facing the “too big to fail” bank.
Analyst at Albion Financial Group Jason Ware told Reuters, "[The bank’s plan] was pretty underwhelming . . . They need to address the bigger issues the bank faces.”
Bank of America CEO Brian Moynihan said some of the expense cuts would come from combining data centers (there are currently 63). The bank also plans on reducing its three separate deposit systems into one. According to Moynihan, there are 50 senior employees currently reviewing some 150,000 ideas for cost cutting.
But analysts and investors seem unmoved. According to Reuters, many estimates say the bank will need to raise $50 billion in the coming years to meet new global capital requirements.
Investors also fear that mortgage settlements will further boost capital needs. The Federal Housing Finance Agency sued BAC, among 16 other banks, for billions of dollars in losses on mortgage securities earlier this month.
Do you think that these problems are specific to Bank of America, or are these problems generally shared across the financial sector? Is Bank of America being fairly treated by analysts and its investors?
For a look at what short sellers think, we ran a screen on the most highly shorted stocks in the financial sector, with float shorts above 20%. Are they on the cusp of a short squeeze, or do greater problems lie ahead for these institutions?
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1. MetLife, Inc. (MET): Provides insurance, annuities, and employee benefit programs primarily in the United States, Japan, Latin America, the Asia Pacific, Europe, and the Middle East. Market cap of $32.04B. Float short at 32.35%. The stock is currently stuck in a downtrend, trading 5.27% below its SMA20, 17.95% below its SMA50, and 28.71% below its SMA200. The stock has lost 25.35% over the last year.
2. Noah Holdings Limited (NOAH): Engages in the distribution of wealth management products to the high net worth population in China. Market cap of $676.25M. The stock is a short squeeze candidate, with a short float at 24.53% (equivalent to 25.22 days of average volume).
3. The St. Joe Company (JOE): Operates as a real estate development company in Florida. Market cap of $1.55B. The stock is a short squeeze candidate, with a short float at 22.63% (equivalent to 33.33 days of average volume). The stock has lost 34.71% over the last year.
4. DuPont Fabros Technology, Inc. (DFT): Engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. Market cap of $1.34B. The stock is a short squeeze candidate, with a short float at 21.43% (equivalent to 13.08 days of average volume). The stock has lost 18.55% over the last year.
5. Greenhill & Co., Inc. (GHL): Operates as an independent investment bank. Market cap of $933.03M. The stock is a short squeeze candidate, with a short float at 20.28% (equivalent to 9.01 days of average volume). The stock is currently stuck in a downtrend, trading 8.38% below its SMA20, 23.36% below its SMA50, and 46.29% below its SMA200. The stock has performed poorly over the last month, losing 16.78%.
6. World Acceptance Corp. (WRLD): Engages in small-loan consumer finance business. Market cap of $943.76M. Float short at 20.13%. The stock is a short squeeze candidate, with a short float at 20.13% (equivalent to 12.75 days of average volume). The stock has gained 43.56% over the last year.