Bank Of America Stock Has Lost 21% YTD, Is It A Buy?
Share this @internewscast.com


Bank of America’s stock (NYSE: BAC) has lost 21% YTD as compared to the 18% drop in the S&P500 index over the same period. The recent drop in the stock price was due to several factors – record-high inflation figures, investor fear of the economy moving into recession due to faster than expected interest rate hikes, and geopolitical tensions. That said, at its current price of $35 per share, the stock is trading 27% below its fair value of $48 – Trefis’ estimate for Bank of America’s valuation.

The bank recently released the first-quarter results, topping the consensus estimates of revenues and earnings. It posted total revenues of $23.23 billion – up 2% y-o-y. It was mainly driven by a 9% increase in the consumer banking segment, followed by a 10% rise in wealth management and a 12% growth in the corporate & commercial banking (global banking) divisions. The segments primarily benefit from improvement in the net interest income driven by higher deposit balance and a slight increase in the net interest margin. Notably, total NII grew 13% y-o-y to $11.6 billion. On the flip side, the positive growth in the above three segments was partially offset by a 15% drop in the global markets unit (sales & trading) due to lower FICC (fixed income, currency & commodity) trading revenues. Further, the provision for credit losses was $30 million in the quarter, as compared to -$1.9 billion in the prior-year period. Overall, it led to a 13% y-o-y decline in the adjusted net income to $6.6 billion.

The bank’s top line grew 4% y-o-y to $89.1 billion in 2021. It was primarily because of higher revenues in investment banking and wealth management divisions. Further, the sales & trading and consumer banking businesses also witnessed a slight improvement in revenues. That said, despite a modest 4% increase in the total revenues, the adjusted net income jumped 85% y-o-y to $30.6 billion, thanks to a favorable decrease in the provisions for credit losses from $11.3 billion to -$4.6 billion.

The Federal Reserve has already increased the benchmark interest rates twice this year, 0.25% in March and 0.50% in the first week of May, and we anticipate further positive revisions in the year. It will likely benefit the NII of the bank, which contributes close to 50% of the top line. That said, the market-driven revenues are likely to normalize, with a recovery in the economy. Altogether, the Bank of America’s revenues are expected to touch $94.24 billion in FY2022. Additionally, BAC’s adjusted net income margin is likely to stabilize at about 28% in 2022, leading to an adjusted net income of $26.8 billion. This coupled with an annual EPS of $3.33 and a P/E multiple of just below 15x will lead to the valuation of $48.

Here you’ll find our previous coverage of Bank of America stock, where you can track our view over time.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates

Share this @internewscast.com
You May Also Like

The Junk Asset Class Yet To Implode

As Warren Buffett says, “Only when the tide goes out do you…

White hat hacker attempts to recover ‘millions’ in lost Bitcoin, finds only $105

Joe Grand, a computer engineer and hardware hacker known by many for…

Celsius Network hires advisers ahead of potential bankruptcy: Report

Crypto lending platform Celsius Network has reportedly onboarded advisers from a management…

Chevron to Cut Back in California, Remain Based in State

Chevron is planning to sell its current headquarters in California and is…

Small-time investors achieve the 1 BTC dream as Bitcoin holds $20k range

Ever since early Bitcoin (BTC) investors woke up millionaires as the ecosystem…

Crypto Funds Post Record $423 Million Outflows As Bitcoin Plunge Rattles Market

Topline Investors piled out of cryptocurrency investment funds at a record pace…

Volkswagen Goes After Tesla, Benz EQE With Mid-Sized, 385-Mile ID.Aero Concept

The Volkswagen ID.Aero will reach production later this year as the brand’s…

Is Roe Vs Wade Just The Latest Blow To Democracy?

WASHINGTON, DC – JUNE 24: Abortion-rights activists Carrie McDonald (C) and Soraya…