It’s time to breakdown an iconic bank name. Here is the breakdown on $BAC, otherwise known as Bank Of America.
Current Price: $38.31
52/Wk High: $39.97
52/Wk Low: $19.51
Market Cap: $334.6 Billion
Dividend: $0.72 / 1.88% Yield.
Read below for the breakdown!
Bank of America ($BAC) is one of the largest banks in the world, serving small and middle-market businesses as well as individual customers throughout a large variety of services including banking, asset management, investing, and much more.
Taking a look at the banking world, Bank of America is the second-largest bank in the United States with roughly $2.26 trillion in assets according to the Federal Deposit Insurance Corporation (FDIC).
Given the recent rally in the financials throughout recent months, Bank of America has moved significantly to the upside, rallying 27.15% in just the last three months.
Below is a price breakdown by sector according to TREFIS (@trefis) data.
Consumer Banking: 40.4%
Corp. & Comm. Banking: 22.5%
Wealth Management: 15%
Sales & Trading: 14.7%
Advisory & Underwriting: 7.3%
Principal Investment / Other: 0.1%
Digging into the numbers, Bank of America beat Q4 2020 expectations with an EPS of $0.59, better than the analyst’s EPS consensus estimate of $0.55. On a year-over-year basis, EPS declined by 20.27%.
Revenues, unfortunately, declined throughout Q4, totaling $20.1 billion for the quarter and representing a 10% decline year over year.
Digging into revenues, net interest income (NII) declined by 16% to $10.3 billion. Management noted that the decline in NII was due to much lower interest rates.
Non-interest income declined as well by 4% to $9.8 billion, but the decline was partially offset by investment banking and trading results.
On the flip side, provisions for credit losses decreased to a lower $58 million, representing a solid reserve release of $828 million.
Taking a look at deposits, total deposits increased by $327 billion or 23% to a stronger $1.7 trillion throughout Q4.
Book value also improved, with Bank of America’s book value per common share rising 5% to $28.72 along with an increase in tangible book value per common share increasing 6%.
Management attributed most of the bank’s issues to the pandemic.
"During 2020, we witnessed the dramatic effects of the health crisis on the economy and our company's operations,” CEO Brian Moynihan said.
Shifting into the balance sheet the numbers are solid.
Total Debt: $450.612 Billion
Total Liabilities: $2.546703 Trillion
Total Assets: $2.819627 Trillion
Cash & Due From Banks: $380.463 Billion
On a valuation basis, Bank of America trades at a premium.
Price to Earnings: 20.45x
Forward Price to Earnings: 13.34x
Price to Sales: 6.24x
Price to Books: 1.35x
Price to Cash Flow: 14.61x
Management has been effective as well but could always improve with a return on assets of 0.68% and a return on equity of 6.73%.
Given the numbers, the analysts are mixed with a mean price target of $36.97/share, representing a -3.50% downside.
The high price target is $44.00/share, representing a 14.85% upside, while the low price target is $30.00/share, representing a -21.69% downside.
The big money is quite involved as well with 70.51% of Bank of America being owned by institutions. Top holders include Berkshire Hathaway, The Vanguard Group, and BlackRock Institutional Trust.
On a technical basis, Bank of America has been bullish. According to the six-month charts the MACD is attempting to shift back to the upside within a range of 1.05 down to 0.9304.
The six-month charts are also indicating an RSI of 61.18 and CCI of 90.97, both of which are on the high end.
In short, Bank of America ($BAC) is a solid long-term investment as it is one of the largest banks in the US, maintains a strong management team, and continues to see long-term growth.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.