BAC will see some volatility based on interest rates and the strength of the economy, but the long-term trend will be based on its ability to drive an increasing asset base which in turn funds its operating cash flows. SDG Investors All rights reserved. When the economy improves, it will be able to release some of its reserves, and earnings should rise. However, scenario 1, in which you get 0.4% GDP growth after wild variance, is extremely improbable. After aggressive monetary policy tightening, the market. Moynihans statement about an expected 60% decline in fees coincided with last weeks 10% selloff. Its being caused by a dearth of tech IPOs, which largely stopped happening when tech stocks crashed. In addition, we also believe JPM faces tougher headwinds because it gained more in M&A and capital markets activity during 2021-22 (its 2021 IB fees were $5.8bn higher than in 2019, compared to BACs being $3.6bn higher), and because its balance sheet has reached a size that triggered more higher capital ratios. Using todays stock price and 2020s financial performance, we would get the following multiples for BAC: Basically, if we assume its financials deteriorate to levels seen during the worst recession in recent memory, Bank of America stock STILL looks cheap! Bank of America Corporation (BAC) Stock Price, News, Quote & History - Yahoo Finance S&P 500 Bank of America Corporation (BAC) NYSE - NYSE Delayed Price. This is an interesting situation in which investors might be punishing the stock for what happened during the GFC, when in reality the GFC has significantly de-risked the business model. Taken together, they suggest that BAC does not expect a severe recession in 2023. Net interest yields have remained stable at around 1.69%. Seemingly everybody thinks a recession is coming, and some think that the coming recession will be severe. Further, any economic weakness arguably should be near term in nature. . According to Wall Street analysts, the average 1-year price target for BAC is 42.26 USD with a low forecast of 32.32 USD and a high forecast of 57.75 USD . BAC has been a core holding in our portfolio for more than a decade, and we initiated our coverage of BAC on Seeking Alpha with a Buy rating in October 2019. Yes. Additional disclosure: I own the stocks in the Best of Breed portfolio. Then, Brian Moynihan said that. Disclosure: I/we have a beneficial long position in the shares of BAC either through stock ownership, options, or other derivatives. Is a market correction imminent? Seeking Alpha - Growth at a Good Price 7h. Sure, that catalyst has not played out over the past decade, but I suspect that it is only a matter of time before investors wake up to this name. The vast majority of economists think the future recession will be mild at worst, non-existent at best. In my valuation, I estimate Bank of Americas total assets growth rate from 2022 to 2032, based on the companys performance in the past years and the macroeconomic outlook. BAC has a forward dividend yield of 2.69%. BAC shares have fallen 13% in December and are now at 1.55x tangible book, 10x normalized P/E and a 2.7% Dividend Yield. We reiterate our Buy rating on Bank of America Corporation stock. In that scenario, ordinary Americans can go on Treasury Direct and buy one month 3.8% APY bonds that pay 0.3% when they mature. Bank of America Corporation (BAC) Stock Price Today, Quote & News | Seeking Alpha Unlock your with Seeking Alpha Premium today BAC Bank of America Corporation Stock Price &. Thats much better than what conventional banks are doing on average, but Bank of America has its own brokerage segment, Merrill Lynch, where Merrill Edge assets are up 32%. Hi there, I am Amanda and I work as an editor at impactinvesting.ai; if you are interested in my services, please reach me at amanda.impactinvesting.ai. My portfolio includes my highest conviction ideas that I think will absolutely crush the market over the next decade. Hi there, I am Amanda and I work as an editor at impactinvesting.ai; if you are interested in my services, please reach me at amanda.impactinvesting.ai. BAC stock is at a 17% discount to JPMorgan on a P/TBV basis: While JPM has historically achieved a higher ROTCE than BAC, we do not believe the difference justifies the valuation gap. BNY Mellon's asset-management division manages about $2.2 trillion in assets. Based on the current $295 billion market cap, these numbers would represent almost 10% of shares outstanding. Price/Book Comparison, Banks (Seeking Alpha) Since 2010, Bank of America's price-to-book ratio has been on a general upward trend. More importantly, we believe BAC earnings have more room to grow than JPMs, as shown by this Q3 snapshot: Q3 P&L JPM vs. BAC (2019, 2021 & 2022). So far, Bank of America hasnt faced a ton of pressure from yield curve inversion. Commercial net charge-offs remained modest at 0.03%, although this could change if the United States enters a recession. Something like this could happen, but then there wouldnt be a recession, as the consensus implies. Excluding the COVID-19 shock in March 2020, BAC shares had previously troughed at around 1.4x TBV. BACs current market capitalization is $269.1bn. Members of Best Of Breed get exclusive access to our model portfolio. Bank of America, for example, has traded at a premium to book value when the Consumer Bank, which acts as a proxy for the American economy, performed well. Due to the risk management history of the company and the macroeconomic outlook, I expect BACs Tier 1 ratio to be around 13% in the following years. A comparison of the 2016 and 2018 P&L statements shows how 2018 represents the real BAC (we have skipped 2017 because it contained one-off tax items related to the U.S. tax cut that year). Today's Change-0.06 (0.18%) Bid (Size) $32.34 (20) And that's why we run the company with such a balance. And this year, it's exceeded that, but that's because of the NII. Using these stable ratios, I estimate the total revenues and net income of BAC from 2022 to 2032. In my opinion, the only thing that may cause Bank of America's stock to defend a premium book valuation is if a U.S. recession is avoided. I am bullish on BAC. This suggests a possible upside of 18.5% from the stock's current price. How did Martin Luther King use ethos , pathos, and logos? Management targets a Payout Ratio of around 30%, and the dividend was raised by 5% (from $0.21) in July. At this weeks investor conference, CEO Brian Moynihan reiterated managements intent to keep costs relatively flat in 2023 and achieve operational leverage in the next few years: We said we'd be flattish this quarter, we'll probably be $15.3-15.5 billion So say $15.5 billion, you take that, times 4, thats $62 billion. Next, theres the decline in investment banking fees. BAC shares are at 1.55x Price / Tangible Book Value (P/TBV), which we believe implies a normalized P/E of just over 10x. The technology industry is not in great shape right now due to expected interest rate hikes this year. Buy. Statements 1 and 3 above are official forecasts by BAC analysts, the second one is a personal opinion of Brian Moynihan. Considering BACs quarterly efficiency ratio indicates that, in December 2021, the company increased its ratio as its revenue decreased albeit its expenses increased very slightly. Many competing firms like Ally Financial (ALLY) offer high-yield savings accounts and newer generations might not be willing to give up those higher rates. View daily, weekly or monthly format back to when Bank of America Corporation stock was issued. Compare the impact of news on the stock market, Bank of America: Why I Bought The Panic (NYSE:BAC)Seeking Alpha. 01, 2022 9:00 AM ET Bank of America Corporation (BAC) 10 Comments 10. A You can. JPM stock is at a much higher tangible book multiple of 1.88x, while BAC has tended to trough at 1.4x since 2018, excluding March 2020. I am not receiving compensation for it (other than from Seeking Alpha). I used two approaches to build my way of using the FCFE model for evaluating bank stocks. Source: BAC results presentation (Q3 2022). RESPONSIBLE CONSUMPTION AND PRODUCTION, 16. BAC Price Targets Summary Bank of America Corp Wall Street analysts forecast BAC stock price to rise over the next 12 months. In its 3Q 2022 financial results, BAC reported total revenue (net of interest expense) of $24.5 billion, compared with $22.7 billion in 2Q 2022 and $22.8 billion in 3Q 2021. This means that even a repeat of the $7.6bn reserve build in Q1-2 2020 would represent a relatively modest figure next to BACs TBV. The consensus among . Now, its possible that well get something totally unlike the forecast. After normalizing provision for credit losses, the company earned around $3.03 in earnings per share during 2020 when interest rates plummeted. Compare the impact of news on the stock market, Bank Of America: Expect It To Report Strong Net Income (NYSE:BAC)Seeking Alpha. It is possible that all the stock needs is an earnings boom from rising interest rates, the kind of macro event that could stir enthusiasm in the stock. JPMorgan Chase Employees & Partners Donate 500+ Needed Items to Mark Veterans Day Norwood News, UPDATE 3-List of bidders for Citigroups Mexican retail arm shrinks as Inbursa drops out Yahoo Finance, Bank Of America: Expect It To Report Strong Net Income (NYSE:BAC). Non-Interest Revenues are coming down from COVID highs, but the net impact will be relatively modest. If Bank of America's credit provisions rise in 3Q, as I think, it might be interpreted as a warning sign that rougher times are ahead for the company and the broader U.S. banking sector. Growth stocks have crashed. Its nice to know what Bank of America doesnt expect a recession in 2023, however, it is impacted by a number of other factors related to recession risks: The expected 60% decline in investment banking fees. Thus, relying on this stable ratio, I estimate the RWAs of Bank of America from 2022 to 2032. While BAC is the global #3 in Investment Banking (IB) fees and have benefited from the boom in M&A and capital markets activity, it had a relatively modest (about $3bn) increase in IB fees between 2019 and 2021: Figures from the most recent quarter tells the same story, with IB fees having risen from $1.53bn in Q3 2019 to $2.17bn in Q3 2021, but falling back to $1.17bn in Q3 2022. Set Alert Options Streaming Charts. I expect the stock to re-value higher over the long term - towards an earnings multiple of at least 15x (I would not be that surprised to see the stock approach 20x). Combined with the fact that deposits are higher than 2018 levels and still growing, this factor alone could account for a sizable increase in earnings. This was offset by higher Market Making & Similar revenues, which we believe is now on a permanently higher base after management allocated more capital to Markets in 2021. In the consumer banking segment, BACs net income increased from $2.9 billion in 2Q 2022 to $3.1 billion in 3Q 2022, driven by increased consumer checking accounts, and digital sales growth of 36%. Bank Of America Stock: Step Up To The Plate (NYSE:BAC) Seeking Alpha BAC has shown strong execution in growing its deposit base, which has grown double digits year over year. So, 1 month treasuries are a good alternative to the 0.1% annual interest savings accounts BAC is offering in New York. In the global banking segment, BACs net income increased from $1.5 billion in 2Q 2021 to $2.0 billion in 3Q 2022. I/we have a beneficial long position in the shares of BAC either through stock ownership, options, or other derivatives. For example, a severe recession and negative full year growth, or no recession at all. With difficulties worsening and no catalysts to warrant a higher value, Bank of America is best avoided before earnings. Sensing that the shares were unfairly beaten down, I figured that the apparent risk factors would blow over and that BAC would do again in Q4 what it did in Q3: beat expectations. The high in the last 52 weeks of Bank of America stock. S Stock Price - SentinelOne, Inc. engages in the provision of endpoint security software that detects, models, and predicts threat behavior to block attacks on any computing device. They stood at $13.8bn and 1.20% respectively as of Q3 2022, after substantial releases in 2021 as the economy stabilized. Scenarios in which we get 0.4% full year growth while also having a severe recession imply an extremely high standard deviation of quarterly growth rates. I have no business relationship with any company whose stock is mentioned in this article. Currency in USD ( Disclaimer ) After Hours 32.36 -0.03 -0.08% 18:58:55 - Real-time Data Type:. The only catalyst needed is what they've already been doing: aggressively repurchase shares and grow the dividend. The 10 year treasury rate and 30 year mortgage rate have quickly returned to 2018 levels. In fact, when the market adjusts to the prospect of a lengthier recession, I believe all major U.S. banks will begin to trade at discounts to book value once more. For BANK OF AMERICA CORP stock forecast for 2023, 12 predictions are offered for each month of 2023 with average BANK OF AMERICA CORP stock forecast of $27.3, a high forecast of $30.58, and a low forecast of $26.33. Please. With BACs P/TBV currently at 1.55x, we believe further downside in the stock is limited. 808 certified writers online. The stock of Bank of America today trades at a 6% premium to book value, but the premium was significantly bigger at the start of 2022. 9. Dividend yield allows investors, particularly those interested in dividend . To compare with levels prior to the Great Financial Crisis, BAC had a 12.0% Tier 1 ratio as of the latest quarter, versus 6.87% in 2007. Moynihans comment) dealt with the company itself, while the other big banks were only indirectly affected. Bank Of America: Prepare For The Worst (NYSE:BAC) Seeking Alpha I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. BACs noninterest expense of $15.3 billion in 2Q 2022 remained the same in 3Q 2022. Finally, theres brokerage fees. Relative to our assumed long-term ROTCE of 15%, this implies a P/E of 10.4x. If you break it down by quarter, there are many ways in which $10,000 could grow to $10,040, as shown in the table below: As you can see, all of these scenarios result in 0.4% full year GDP growth. Our return forecasts indicate a total return of 82% (22.5% annualized) by 2025 year-end. Finally, Blackstone (BX) saw a wave of withdrawals from one of its REITs, leading investors to question the health of big institutions. The average price target is $6.50 with a high forecast of $6.50 and a low forecast of $6.50. 14 Wall Street analysts covering (NYSE: BAC) stock is to Buy BAC stock.Out of . Major banks are likely to experience a continuation of 2Q-22 asset quality trends in the third quarter, giving the market a solid cause to discount institutions like Bank of America's cash flows and profits prospects. Table 1 shows that BACs RWAs-to-total assets ratio is relatively stable. I rate the stock a buy as the large shareholder yield means investors are paid in the near term, with larger long-term upside in the event of multiple expansion. Unlike during the Great Financial Crisis, BAC's balance sheet is conservatively leveraged - purposefully such that the GFC can never happen again. BACs investment banking fees declined 47% last quarter, so weakness in the segment is nothing new. You had the $500 million in FDIC that we got landed on us after earnings. INDUSTRY, INNOVATION, AND INFRASTRUCTURE, 12. In the third quarter of 2022, Bank of America reported a Tier 1 ratio of 12.8%. We continued to see strong organic client growth across our businesses, with increased client activity helping to drive revenue up by 8%. Then, Brian Moynihan said that investment banking fees would decline 60% in the fourth quartertheyd been declining prior to that, but -60% would be the worst decline this year. Global, long-term, fundamentally-oriented & concentrated investing.With more than 10 years' buy-side experience, I look at stocks globally and across industries, with a focus on the U.S. and U.K.. My investing style can best be described as "Quality Growth" or "Growth At a Reasonable Price".(previously writing under the name "Blue Sky Capital" until December 2019). First, the yield curve reached its deepest inversion since 1990, with a -75 basis point spread between 2 and 10 year treasuries. Interest rates are rising, yet Bank of America stock is still cheap. Based on next years consensus, the likelihood of a severe recession is quite low. You'd think that Bank of America (NYSE:BAC) would be just the perfect stock for this environment, given the rising interest rate environment. I have no business relationship with any company whose stock is mentioned in this article. 65% of economists say that there will be a recession, and their average forecast is 0.4% growth for the full year. ablokhin/iStock Editorial via Getty Images. Most likely, BAC underperformed because some news items (e.g. Besides growing its deposit base, I can see earnings upside from rising interest rates and more importantly, rising net interest yields. Bank of America (BAC) $37.85 0.85 (2.30%) 18:30 EST BAC Stock Quote Delayed 30 Minutes 7 Cheap Blue-Chip Stocks to Buy Before They Rebound By Joel Baglole, InvestorPlace Contributor Nov. Discover historical prices for BAC stock on Yahoo Finance. It operates through the following segments: Consumer Banking, Global Weve seen inverted yield curves before, they didnt kill BACs margins. In its most recent quarter, BAC increased loan loss provisions by $1.5 billion, indicating that it expects an increase in defaults. This means BAC would almost certainly again achieve profitability every quarter and continue to add to its TBV. INDUSTRY, INNOVATION, AND INFRASTRUCTURE, 12. Then we have scenario 2, where growth is fairly even across all the quarters. Discover our growing collection of curated stories on Sports Cars. Forecast target price for 12-13-2022: $ 31.05. Across the bank, we grew loans by 12% over the last year as we delivered the financial resources to support our clients. Since then, BAC shares have returned 27% (with dividends) in just over 3 years, despite having fallen 34% from their peak in January 2022. Therefore, scenario 1 (the severe recession) likely wont happen if the 0.4% full year consensus forecast is hit; it involves two low-probability events occurring one after the other. Bank of America: Why I Bought The Panic. Please disable your ad-blocker and refresh. There are two key risks here. So, BACs brokerage revenue could help buffer against possible yield curve and deal making impacts in Q4. The performance of the stock was mixed when compared to some of its competitors In a short term, a correction is expected to the 0.5 Fibo level with a $34 price target. Please. It really looks like the worst has been more than priced in for Bank of America, and that the ongoing panic selling presents a buying opportunity to long term investors. For BAC stock to have a P/B ratio near the five-year low. BACs ROTCE took a step change in 2018, jumping from below 10% in the years preceding it to mid-teens after (except the COVID-impacted 2020). Q4 2022 is likely to be similar. Since 2018, BAC stock has troughed in December 2018, March 2020 and then September 2022: Bank of America Share Price (Last 5 Years). In the event of a recession, its severity would be unlikely to exceed the unprecedented disruption caused by COVID-19 in 2020, so we would expect the required credit costs to be lower. The analyst firm set a price target for 36.00 expecting BAC to rise to. Get the latest articles, videos, and news about Sports Cars on Flipboard. When banks tighten their lending standards to limit default risks, it is a significant indicator that investors should avoid investing in the banking sector. With inflation and economic trends straining customers, more of them may default on personal loans that banks like Bank of America were all too pleased to make a year ago. While the stock continues to trade at conservative multiples since the Great Financial Crisis, the company's balance sheet remains very strong due to the greater restrictions placed on it in response to the crisis. Bank of America Corp (BAC) NYSE Create Alert Add to Watchlist 32.38 -0.06 -0.18% 09/12 - Closed. First, there are fears that the rapidly rising interest rates may come alongside a weakening economy. The rising interest rate environment may lead to a sustained increase in net interest yields. BAC achieved a net interest yield of 2.5% in 2018 - far larger than the 1.69% in this past quarter. If that happens, margins will start to shrink. SDG Investors All rights reserved. However, in the past two years, despite all the macroeconomic challenges, the company was able to make huge profits and develop its operations. Given the deterioration in the general economic situation since the publication of 2Q-22 earnings, I believe it is just a matter of time before Bank of America's stock begins to trade at a discount to book value. For Bank of America to fall back to 2020 earnings levels, the coming recession would have to be severe, not mild: the second quarter of 2020 saw a 29% GDP drop. Find the latest Bank of America Corporation (BAC#) stock quote, history, news and other vital information to help you with your stock trading and investing. Please. Thus, I think the stock is a buy. After projecting the stocks total assets, I calculate its RWAs from 2022 to 2032. Bank of America pays a generous dividend and is aggressively buying back stock - the two key catalysts for future multiple expansion. The stock is a buy. The stock is a buy. BAC Signals & Forecast A buy signal was issued from a pivot bottom point on Thursday, December 08, 2022, and so far it has risen 0.309%. Credit cards represent just 11% of consumer loans, however, this segment generates almost a half of earnings Yield curve (U.S. Treasury Yield Curve dot com). Compared with Net Income of approximately $30bn in both 2019 and 2021, the implied P/E is around 9x. BAC nonetheless has stayed profitable every quarter, including in Q1 and Q2 of 2020 when $7.6bn were added to reserves: BAC Earnings, Provisions & Pre-Tax Profit by Quarter (Since 2020). I am not receiving compensation for it (other than from Seeking Alpha). I am not receiving compensation for it (other than from Seeking Alpha). BAC Stock Price - Bank of America Corp. is a bank and financial holding company, which engages in the provision of banking and nonbank financial services. The Common Equity Tier 1 Ratio stood at 10.4%. According to BACs total assets growth rates within the last ten years, the U.S. inflation and recession outlook, and FEDs monetary policies, I estimate total assets growth rate of 1.4% to 1.6% for BAC from 2022 to 2032. The stock peaked in December of 2021 with a price just above $42. I have no business relationship with any company whose stock is mentioned in this article. In my opinion, the ultimate indicator that it is time to avoid cyclical banks is when their equities begin to trade at discounts to book value. It is possible that BAC has to eventually increase the cost of deposits, or risk ceding deposits to competition. (NYSE:BAC) | Seeking Alpha Long Ideas Financials Is Bank Of America A Good Stock To Buy During The Market Dip? The Q1 drop (50%) would be the steepest in recorded history, while the Q4 gain (111.6%) would also be the highest in recorded history. Drew Angerer Last week, Bank of America ( NYSE: BAC) crashed 10%, as a slew of bad news reports rocked the financial services sector. The treasury yield curve is now fully inverted, with all maturities having higher yields than the 10 year. High conviction investment ideas in the winners of tomorrow. Build your trading network; Follow your favorite assets . Consumer net charge-offs at Bank of America increased in the second quarter, indicating that a weakening labor market and sky-high inflation continue to weigh on the bank's consumer credit division. Bank of America got hit harder than most banks in last weeks selling. Julian Lin is a top ranked financial analyst. Buy the big winners of tomorrow at stupid cheap prices today. Basically, 2 year treasuries are not viable alternatives to savings accounts. BAC Lowest Forecast Wall Street Target 32.32 USD This results in rising loan loss provisions when recessions are expected, and higher actual defaults when recessions occur. In my view, the better metric to track is that of average deposits. PEACE, JUSTICE AND STRONG INSTITUTIONS, 2 and 10 year treasuries. Also, according to the second approach, I calculate the FCFE of the company. BACs Net Yield on Interest-Earning Assets was just 206 bps in Q3 2022, and we believe there is potential for NII to in show similar growth in coming years as it did in 2016-18. Management targets a Payout Ratio of around 30%, and the dividend was raised by 5%. Bank of America reported a net income of $7.1 billion in 3Q 2022, compared with $6.2 billion in 2Q 2022 and $7.7 billion in 3Q 2021. BAC has demonstrated this during COVID-19. For the year, Schwabs revenue is up 10.78% and its earnings per share are up 25%. Prior to the Great Financial Crisis, BAC stock traded higher than $50 per share. Yet that impatience may be misplaced. There arent that many scenarios in which GDP grows 0.4% for the full year but a deep recession occurs in the interim. Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. As of 2022 December 08, Thursday current price of BAC stock is 32.740$ and our data indicates that the asset price has been in a downtrend for the past 1 year (or since its inception).. Bank Of America stock price has been showing a declining tendency so we believe that similar market segments were not very popular in the given period. Management expects to limit cost growth and achieve substantial operational leverage in the next few years. the general economic situation since the publication of 2Q-22 earnings, I believe it is just a matter of time before Bank of America's stock begins to trade at a discount to book value. I wrote this article myself, and it expresses my own opinions. Find real-time BAC - Bank of America Corp stock quotes, company profile, news and forecasts from CNN Business. With shares at $32.26, we expect an exit price of $56 and a total return of 82% (22.5% annualized) by the end of 2025. View real-time stock prices and stock quotes for a full financial overview. According to the companys 3Q 2022 financial results, its net income decreased by 8% YoY. Due to BACs continuing organic growth in the consumer banking segment, global banking segment, global wealth & investment management segment, and global markets segment, I expect the company to report solid financial results in the following years. If you have an ad-blocker enabled you may be blocked from proceeding. Then, based on the companys total revenue to total assets ratio (which is relatively stable), and BACs capital Tier 1 ratio, I estimate its net income from 2022 to 2023. The sheer magnitude of BACs selloff, then, would appear to be motivated by fear. Year to date, Bank of Americas (NYSE:BAC) stock price is down by 19%. In other words, this stock is trading at 12x earnings in a low interest rate environment with substantial upside as interest rates rise. This Silicon Valley tech firm has taken a hard hit in recent months. However, compared with the second quarter of 2022, its net income is up 15%. That is much higher than the $47 billion of net interest income earned in 2018, largely because earnings assets stood at only $1.98 billion then. Using the free cash flow to equity (FCFE) model, I evaluate that BAC is worth more than $43 per share. 13 equities research analysts have issued 12 month price objectives for Bank of America's shares. BofA has invested $18 billion in technology over the past six years, while opening 300 new branches and refurbishing 2,000 others. According to the first approach of using the FCFE model to evaluate bank stocks, I estimate total assets, total liabilities, Tier 1 ratio, total risk-weighted assets (RWAs), net revenues, and net income of BAC from 2022 to 2032. BAC.PE (Bank of America Preferred Class E) stock price has stopped reporting on Seeking Alpha. First, in a weak economy BAC would likely see increased credit losses. Negative dynamics for Bank of America shares will prevail with possible volatility of 2.587%. Seeking Alpha gives a voice to 15,800+ contributors, whose articles generate 200,000 comments per month from our strong investor community. In global markets segment, the companys net income of $1.0 billion in 2Q 2022 increased to $1.1 billion in 3Q 2022. If you have an ad-blocker enabled you may be blocked from proceeding. Under CECL accounting standards since the start of 2020, banks have had to reserve for all expected credit losses upfront (albeit using probability-weighted figures from a range of scenarios). I wrote this article myself, and it expresses my own opinions. This is a company that repurchased $25 billion of stock in 2021 and $28 billion of stock in 2019. So, I would expect Bank of Americas Q4 NII growth to be slower than in previous quarters, but still positive. While BAC does have quite a few red flags as well, it's well worth noting that its non-U.S. lending book does not have exposure to offshore-based countries, which suggests that WFC is in even a much more risky posture. Please disable your ad-blocker and refresh. RESPONSIBLE CONSUMPTION AND PRODUCTION, 16. Meaning that as interest rates rise, the leverage costs will also rise for ZTR. Goldman Sachs (GS) thinks that theres a 35% chance of a recession next year, which is below the 65% average estimate from Wall Street Journals surveyed forecasters. My thesis on why cannabis stocks are a generational secular growth story. At $32.98, BAC stock is trading at 1.55x its Q3 2022 TBV of $21.21. Is this happening to you frequently? When the 1 month treasury has a serious yield on it, things change. Its unfortunate for Bank of America that this is happening, but as mentioned earlier, its only 4.8% of the total business. Also, the revenues-to-assets ratio of BAC was relatively stable during the last 10 years (except in 2019, which reflects the effects of the COVID-19 pandemic). However, compared with the second quarter of 2022, its net income is up 15%. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. ALLT Stock Price Prediction $6.50 (68.83% Upside) Based on 1 Wall Street analysts offering 12 month price targets for Allot in the last 3 months. Our site is the only free, online source for over 2,700 public companies . When I last reviewed Bank of America, I mentioned that fundamentals such as asset quality trends and slowing growth in the Consumer Bank were concerning. is up 15%. As Bank of America Corporation's (NYSE:BAC)) market cap dropped by US$41b, insiders who sold US$831k worth of stock were able to offset their losses. In the past 5 quarters, BACs Total Average Loans & Leases have risen 12% year-on-year: BAC Average Total Loans & Leases (Last 5 Quarters). Authors calculations based on SA data and BACs financial reports. BACs NII has been growing rapidly this year, thanks to the Feds rate hikes and the resumption of loan growth. Bank of America (BAC) Stock Price, Quote, News & Analysis Bank of America (BAC) NYSE: BAC Bank of America Stock Price & Analysis 21,671 Followers BAC Stock Chart & Stats Advanced Chart > $32.38 -$0.06 (-0.18%) At close: Dec 09 4:00 PM EST Day's Range $0 - $0 52-Week Range $29.14 - $48.97 Previous Close $32.38 Volume 36.99M This is a tricky question. BAC credit reserves peaked at $21.1bn, or 1.96% of loans and leases outstanding, at Q2 2020 (compared to $13.5bn and 1.27% respectively at the start of 2020). Is this happening to you frequently? Moynihan stated at the same investor conference this week that investment banking revenues were down 55-60% year-on-year in Q4, but offset by Markets revenues being 10-15% higher, the latter due to Equity revenues being flattish but Fixed Income revenues growing 20% thanks to market volatility. The negative growth in earnings was entirely due to the reserve build. Seeking Alpha is the #1 website for actionable stock market opinion and analysis, and vibrant, intelligent financial discussion. In my valuation, I estimate Bank of Americas total assets growth rate from 2022 to 2032, based on the companys performance in the past years and the macroeconomic outlook. Is this happening to you frequently? BAC Total Non-Interest Expenses ($bn) (Last 5 Quarters). I am not receiving compensation for it (other than from Seeking Alpha). It is impressive if not surprising that the stock has recently come close to former levels, as the strong growth since then has helped overcome the immense dilution required during the financial crisis. BAC income statement history Quarterly Earnings BAC earnings history Dividends 2.48% Yield TTM percentage of income the fund portfolio returned to investors Bank of America Corporation (NYSE:BAC): Payout ratio Payout ratio 25.48% amount of dividends paid out to shareholders relative to the net income BAC dividends history Debt to Assets Q Y Growth in Net Interest Yield has been helped by a mix shift in Interest-Earning Assets to Loans & Leases, which represents 39% of Interest-Earning Assets but has a Net Yield that is about one third higher (394 bps vs. 294 bps in Q3 2022). In the past 5 quarters, BACs Net Interest Yield (as reported) has risen by 23% from 168 bps to 206 bps: BAC Net Interest Yields (FTE Basis) (Last 5 Quarters). The letter from the Birmingham Jail was written on April 16, 1963 by Martin Luther King Jr, this letter defends how people are treated with the violence of racism, he also responded to the public stating his concern. BAC stock is at a 17% discount to JPMorgan (JPM) on a P/TBV basis, more than is justified in our view. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Given the current short-term trend, the stock is expected to rise 13.75% during the next 3 months and, with a 90% probability hold a price between $36.91 and $45.44 at the end of this 3-month period. Another element in my valuation is the stocks Tier 1 ratio. In its most recent quarter, Bank of America reported 24% growth in net interest income (NII,) despite the 2/10 year spread being negative at the time. Our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts, the CEO commented. Bank of America Stock Forecast 12-13-2022. Bank of America's credit provisions, in particular, increased to $523 million in the second quarter, a clear indicator that asset quality may be degrading more broadly amid a rising set of issues for the American consumer. Bank of America Corporation (NYSE:BAC) has scheduled its 3Q-22 earnings report for October 17, 2022, and the bank is expected to show continued deterioration in asset quality, indicating larger credit provisions and loan losses. Consumer And Commercial Portfolios (Bank Of America). Credit costs, even in the event of a recession, should be manageable. See BAC's full dividends and stock split history on the Dividend tab. According to Table 1, BACs Tier 1 ratio decreased from 13.5% in 2020 to 12.2% in 2020. These amounts led to an increase of 359 bps to 65.33%, compared with the quarter that ended in Sep 2021. King's team, was written on bits of paper. Last week, Bank of America (NYSE:BAC) crashed 10%, as a slew of bad news reports rocked the financial services sector. Today, it trades at 10.25 times earnings and 1.08 times book value. 14 analysts, 7 (50%) are recommending BAC as a Strong Buy, 2 (14.29%) are recommending BAC as a Buy, 5 (35.71%) are recommending BAC as a Hold, 0 (0%) are recommending BAC as a Sell, and 0 (0%) are recommending BAC as a Strong Sell. If GDP grows .04%, then it reaches $10,040 in 2023. Bank of America Corp BAC:NYSE. In 2Q-22, approximately 78% of credit provisions were tied to Bank of America's Consumer Business. Why did I make this bet, when I knew that people were getting very afraid of Bank of Americas stock? I am not receiving compensation for it (other than from Seeking Alpha). Year to date, Bank of America's ( NYSE: BAC) stock price is down by 19%. If we assume a 2.5% net interest yield, then the $2.8 trillion in earnings assets would lead to $67 billion of net interest income. The average price target represents a 68.83% change from the last price of $3.85. Excludes $2.07bn First Data JV impairment in 2019. Read More Earnings see more Analyst Ratings see more Q How do I buy Bank of New York Mellon (BK) stock? I wrote this article myself, and it expresses my own opinions. I suspect that these targets reflect skepticism and impatience that BAC can break out of its current multiple range. It makes little sense to go public in a weak market. With interest rates rising, shouldn't BAC be simply rising? The more pressing risk is that of disruption. According to 31 analysts, the average rating for BAC stock is "Buy." The 12-month stock price forecast is 42.26, which is an increase of 30.51% from the latest price. We have just calculated that the company might earn around $5.14 in earnings per share if current interest rates remain where they are for the long term. As of right now, BACs earnings decline is due to regulatory factors that apply only to banks. Last week, Bank of America (NYSE:BAC) crashed 10%, as a slew of bad news reports rocked the financial services sector. According to my calculations, with total assets CAGR of 1.4% to 1.6%% from 2022 to 2032, Tier 1 ratio of 13%, and COE of 8.5% ( I calculated the COE of BAC using the companys P/B value, ROE, and U.S. 10-year treasury bond yield), Bank of America stock is worth $43.28 per share in my view. In the last quarter, the yield curve was only inverted from the 6 month maturity onward. Using the free cash flow to equity (FCFE) model, I evaluate that BAC is worth more than $43 per share. Large banks achieve NII on favourable Net Interest Yields, thanks to their cheap deposit funding; yields had shrunk in recent years due to Quantitative Easing ("QE"), but are now rising again, They have large Non-Interest Revenues such as Investment Banking Fees, which tend to become elevated during periods of QE as cheap money stimulates corporate and market activity, offsetting NII weakness, Their cost ratios tend to be stable or improving, as economies of scale and use of technology help them become more efficient, They are now far less vulnerable to economic downturns than in the past, thanks to central banks willingness to deploy QE and much larger capital buffers after the 2008 crisis, BAC: Share price $32.98, TBV/Share $32.98, P/TBV = 1.55x, JPM: Share price $131.59, TBV/Share $69.90, P/TBV = 1.88x, From 2023, Net Income to be 15% retained for growth, 30% paid out as dividends and 55% on buybacks, Buybacks to be carried out at a P/TBV of 1.7x. Buy. $BAC - Bank Of America: Bargain At 10x P/E After 13% Decline In December. Bank of America's asset quality began to worsen in the second quarter as economic risks such as inflation, a more aggressive interest rate hike cycle from the central bank, and slowing economic growth increased. According to today's jobs data, the U.S. economy added 263K jobs in September, down from 315K in August. Because inflation remains a major concern for consumers, I am concerned that retail enterprises and banks may face a wave of loan defaults as more and more people are forced to choose between paying their grocery bill and making a payment on their personal loans. That was clearly exceptional and, at the other two troughs, BACs P/TBV multiple was around 1.4x: BAC Stock Price & Valuation Troughs (Since 2018). Net Interest Income is up 24% year-on-year as of Q3, thanks to the Feds rate hikes and the resumption of loan growth. BAC | Complete Bank of America Corp. stock news by MarketWatch. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Having looked at various risks and opportunities facing Bank of America in Q4, its time to answer the question I started the article with: Put simply, because Bank of America stock is cheap, and its growing at a decent pace if you exclude PCLs. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. My top pick to take advantage of the digitization of real estate transactions. Julian Lin runsBest Of Breed Growth Stocks, a research service uncovering high conviction ideas in the winners of tomorrow., Get access to hishighest conviction ideas here.. BACs Pre-Provision Profit has grown by more than JPMs on both a year-on-year basis and when compared to 2019. In the first quarter of 2022, which ended on 31 Mar 2022, both revenues and expenses increased and led to 71 bps improvement and sat at 66.04% in BACs efficiency ratio. BAC has kept its total expenses at $15.3bn in the last 3 quarters, despite elevated inflation, and its Efficiency Ratio has continued to improve (to 62% by Q3), towards to high 50s level that prevailed before COVID-19. Yahoo. https://seekingalpha.com/article/4563087-bank-of-america-stock-bargain-after-decline . Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. Overall, the GDP growth consensus calls for full year GDP growth of 0.4%. Bank of America Stock (NYSE:BAC), Analyst Ratings, Price Targets, Predictions Analysts publish ratings and price targets on most stocks. BAC has historically benefitted from offering low to non-existent interest rates on deposits. Since then, it has tumbled badly, losing 75% of its share . Thats very cheap. It may have contributed to it. The latest price target for Bank of America ( NYSE: BAC) was reported by Piper Sandler on Thursday, December 8, 2022. If economists average forecast is hit, then well likely get something like scenario 3. The stock remains cheap even if we assume a severe recession hits and causes earnings and other metrics to decline to 2020 levels (that is, the levels seen during the COVID lows). Bank of America Corporation ( NYSE: BAC) has scheduled its 3Q-22 earnings report for October 17, 2022, and the bank is expected to show continued deterioration in asset quality, indicating larger. According to the current price, Bank of America is 110.44% away from the 52-week low. (The same is true for Net Income.) The last reported interest rate at the end of May 31st, 2022, was 1.645%, with $159.750 million outstanding. BAC has traded at conservative multiples for so long that it can be easy to judge that it is not undervalued based on historical multiples. Bank of America's stock, on the other hand, traded at a discount to book value whenever severe economic disasters occurred. BAC stock pays a dividend of $0.22 per quarter, or $0.88 annualized, representing a Dividend Yield of 2.7%. On average, they expect the company's share price to reach $44.68 in the next twelve months. (BAC) NYSE - NYSE Delayed Price . A negative 2/10 spread isnt a problem for BAC, because savers have to commit to a 2 year treasury investment in order to guarantee the high yield. The March 2020 trough, following the start of COVID lockdowns in the U.S. and Europe, saw BACs P/TBV multiple fell to around 1x. . BACs valuation has shrunk significantly even as its investment case remains on track, as we will explain below. Stocks have gotten cheaper, but if a recession hits, then maybe theyll have to go cheaper still. Please disable your ad-blocker and refresh. Discover magazines in #Sports Cars. Credit costs, even in the event of a recession, should be manageable. We're comfortable with that increasing our investment next year for $300 million plus in technology spend and absorbing in that $60-62.5 billion run rate , Longer term, we think we give a couple of hundred basis points of operating leverage on a given year. This is unlikely (financial/economic data tends to mean revert over time), so the consensus points to something like scenario 3. The average Wall Street rating is only 3.96 out of 5. According to the company's 3Q 2022 financial results, its net income decreased by 8% YoY. High brokerage fees driven by market volatility. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund . Big profits are available for the taking, but you must act now. In the current one, even the 1 month bill has a higher yield than the 10 year bond. That would place the stock at just 7.2x earnings. There are at least two potential reasons why the stock is down. For Q1-3 2022, BAC had a ROTCE of 14.9%, JPMs ROTCE is only 13% higher at around 17%. The companys provision for credit losses increased from $0.5 billion in 2Q 2022 to $0.9 billion in 3Q 2022. Zacks' proprietary data indicates that International Business Machines Corporation is currently rated as a Zacks Rank 3 and we are expecting an inline return from the IBM shares relative to the . in the fourth quartertheyd been declining prior to that, but -60% would be the worst decline this year. The average ROTCE across 2018 to Q1-3 2022 is 14.6%. If Bank of America's asset quality improves and the bank announces an unexpected QoQ decline in credit provisions for 3Q-22, BAC may continue to trade at a premium valuation. This is a stock worth buying on any dip. The average price target of $48 per share represents only 30% upside. Alpha Spread Bank of America Corp NYSE:BAC Watchlist Manager Summary DCF Valuation Relative Valuation Wall St Estimates Profitability Solvency Financials Discount Rate Price: 32.84 USD -0.48% Updated: Dec 7, 2022 Section: Profitability Summary Bank of America Corp's profitability score is 58/100. Because BACs ROTCE had a step change in 2018, only P/TBV values from 2018 onwards is relevant to the present. Let's calculate a back-of-the-envelope projection of that earnings upside. I have no business relationship with any company whose stock is mentioned in this article. Book value multiples are set to contract. Benzinga tracks 120 analyst firms so investors can. Last Price $32.38 NYSE Closing Price as of 7:00PM ET 12/09/22. 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