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Correct me if I'm wrong but retail banks historically aren't cash cows, they return about 1% of assets on deposit. They generally have to pass on the better int

Correct me if I'm wrong but retail banks historically aren't cash cows, they return about 1% of assets on deposit. They generally have to pass on the better interest rates to their customers. In a world where the risk-free rate is like 5%, it probably makes sense to divest of banks and look for higher yields in something like Apple. Their stock pump may have just been reflective of transient economics. Just speculating, this isn't my area. [edit] Also, personal savings rates are crashing in the US and revolving debt utilization is way up. Maybe Berkshire is worried about cyclical defaults and withdrawals of principal? Even if bank ROA is up, lower deposits mean lower revenues. [1] [1] https://fred.stlouisfed.org/graph/?g=VtLo https://fred.stlouisfed.org/graph/?g=VtLo

lotsofpulp 4y ago
Berkshire has a considerable amount of Bank of America stock, whose profit margins are trending very well: https://www.macrotrends.net/stocks/charts/BAC/bank-of-america/net-profit-margin https://www.macrotrends.net/stocks/charts/BAC/bank-of-americ... Its other big bank holdings, Amex, Citi, Bank of NY Mellon, and US Bank also have healthy double digit profit margins. https://www.cnbc.com/berkshire-hathaway-portfolio/ https://www.cnbc.com/berkshire-hathaway-portfolio/
ggm 4y ago
If you hold enough deposits, 1% is pretty good. Remember, these assets aren't "your" assets. you hold shares in the bank. the 1% isn't a rate of return on the share pool. Banks pay dividends reliably.
Scoundreller 4y ago
> return about 1% of assets on deposit So? Investors don't have to lower-bound value bank stock at its deposits. (God I hate google and its insistence on corporate search results, I search for "how much money does bank of america have on deposit" and all the results are about making deposits on bankofamerica.com) Bank of America has $1.9t in deposits, but its equity value is $285b. So a 1% return on deposits = 6.66% return for investors (excluding other costs and other revenue (account fees?))
- brookst 4y ago
  Side note re: search, Bing Chat answers your question (cut and paste from your quote): Bank of America has different types of deposits, such as interest-bearing deposits, non-interest-bearing deposits, and mobile deposits. According to the annual Summary of Deposits from the FDIC, Bank of America had $1.36 trillion in total deposits as of June 2019(1), making it the largest US bank by deposits. However, this number may have changed since then. The Bank of America mobile check deposit limit is $10,000 per month for accounts opened for three months or longer, and $2,500 per month for accounts opened for fewer than three months(2). Learn more: 1. retailbankerinternational.com 2. gobankingrates.com
  - function_seven 4y ago
    What a strange mix of corporate financials and retail product specs. The first sentence implies that “mobile deposits” are of a kind with interest- and non-interest bearing deposits. The last sentence talk about the process of making a deposit into your own account. The middle two sentences actually answer the question regarding the total volume of deposits across the bank. Verdict: Still useful! Non sequitor-ish, but better than SEO spam :)
    - jrumbut 4y ago
      Or is it? The Bing answer is about $600 billion less than the human generated answers. One of them is wrong (or at least outdated), I don't know enough about BoA to know which though.
      - brookst 4y ago
        Indeed. Or, as Bing notes, is the definition different? There is a sourcing link (my cut paste of the HTML did not get the full URL, unfortunately)
- robocat 4y ago
  Aside: I would expect equity value of a bank to be predominantly dependent on returns, since many banks don’t have a lot of assets (except perhaps investment assets that produce returns and the assets themselves are valued on their returns).

lotsofpulp 4y ago

Berkshire has a considerable amount of Bank of America stock, whose profit margins are trending very well: https://www.macrotrends.net/stocks/charts/BAC/bank-of-america/net-profit-margin https://www.macrotrends.net/stocks/charts/BAC/bank-of-americ... Its other big bank holdings, Amex, Citi, Bank of NY Mellon, and US Bank also have healthy double digit profit margins. https://www.cnbc.com/berkshire-hathaway-portfolio/ https://www.cnbc.com/berkshire-hathaway-portfolio/

ggm 4y ago

If you hold enough deposits, 1% is pretty good. Remember, these assets aren't "your" assets. you hold shares in the bank. the 1% isn't a rate of return on the share pool. Banks pay dividends reliably.

Scoundreller 4y ago

> return about 1% of assets on deposit So? Investors don't have to lower-bound value bank stock at its deposits. (God I hate google and its insistence on corporate search results, I search for "how much money does bank of america have on deposit" and all the results are about making deposits on bankofamerica.com) Bank of America has $1.9t in deposits, but its equity value is $285b. So a 1% return on deposits = 6.66% return for investors (excluding other costs and other revenue (account fees?))

brookst 4y ago
Side note re: search, Bing Chat answers your question (cut and paste from your quote): Bank of America has different types of deposits, such as interest-bearing deposits, non-interest-bearing deposits, and mobile deposits. According to the annual Summary of Deposits from the FDIC, Bank of America had $1.36 trillion in total deposits as of June 2019(1), making it the largest US bank by deposits. However, this number may have changed since then. The Bank of America mobile check deposit limit is $10,000 per month for accounts opened for three months or longer, and $2,500 per month for accounts opened for fewer than three months(2). Learn more: 1. retailbankerinternational.com 2. gobankingrates.com
- function_seven 4y ago
  What a strange mix of corporate financials and retail product specs. The first sentence implies that “mobile deposits” are of a kind with interest- and non-interest bearing deposits. The last sentence talk about the process of making a deposit into your own account. The middle two sentences actually answer the question regarding the total volume of deposits across the bank. Verdict: Still useful! Non sequitor-ish, but better than SEO spam :)
  - jrumbut 4y ago
    Or is it? The Bing answer is about $600 billion less than the human generated answers. One of them is wrong (or at least outdated), I don't know enough about BoA to know which though.
    - brookst 4y ago
      Indeed. Or, as Bing notes, is the definition different? There is a sourcing link (my cut paste of the HTML did not get the full URL, unfortunately)
robocat 4y ago
Aside: I would expect equity value of a bank to be predominantly dependent on returns, since many banks don’t have a lot of assets (except perhaps investment assets that produce returns and the assets themselves are valued on their returns).