Thursday, July 16, 2015

A Balance Sheet Quirk At Bank Of America

Back in late 2011, I read John Hempton's March 2010 post about Repo 105 like transactions at Bank of America on his blog, Bronte Capital. Hempton, an Australian hedge fund manager and one of my favorite bloggers, wrote about how you could detect evidence of the transactions--which he described as being intended to make the bank look less risky before end of quarter reporting--by comparing the bank's average assets in a quarter to its assets at the end of the quarter.

Hempton's example was from 2006, but I used the same method to look at Bank of America's 2010 and 2011 results and was surprised to discover similar results. I initially planned to write about it then, but events intervened and I didn't have the chance to do so.

Well, I've finally written about this, taking into account the additional three and three-quarters years of financial results that have passed since then. The results are a little more ambiguous than they were back in 2011, though I think they're still interesting. Anyway, they can be found in my most recent SeekingAlpha article here.

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