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Category: Stock Market and Bank of America (BAC)
Date: 15 April 2021 Stock Price of Bank of America: $39.88 Market Capital of Bank of America: $344 billion We take a look at the 1st quarter earnings report of their 2021 fiscal year of Bank of America, a diversified financial services company that recorded revenues of over $22.8 billion for their 1st quarter of 2021, and net income of $8.1 billion for the quarter.
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Chairman and CEO Brian Moynihan- Our team produced exceptional results this quarter: record or near-record levels of deposits, investment flows, investment banking revenue, digital users and client engagement"
About Bank of America (BAC)
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers, including approximately 2,800 lending centers, 2,600 financial centers with a Consumer Investment Financial Solutions Advisor and 2,000 business centers; approximately 16,800 ATMs; and awardwinning digital banking with approximately 38 million active users, including approximately 29 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Overview of Bank of America's 4th quarter 2020 earnings report
Highlights of Q1 2021
- Net income of $8.1 billion, or $0.86 per diluted share
- Revenue, net of interest expense, increased 0.2% to $22.8 billion
- Net interest income (NII)(D) declined 16% to $10.2 billion, driven primarily by lower interest rates
- Noninterest income rose 19% to $12.6 billion, reflecting strong capital markets results, as well as higher investment and brokerage income
- Provision for credit losses decreased $6.6 billion to a benefit of $1.9 billion, reflecting a reserve release of $2.7 billion amid an improved macroeconomic outlook and balance declines(A)
- Noninterest expense rose 15% to $15.5 billion, driven by elevated net COVID-19 costs; an acceleration of expenses due to incentive compensation award changes; an impairment charge for real estate rationalization; higher revenue-related expenses; higher severance costs and special compensation awards for associates
- Loan and lease balances in the business segments declined 7% to $887 billion, driven primarily by declines in commercial loans and lower card balances
- Deposits rose $366 billion, or 25%, to $1.8 trillion • Common equity tier 1 (CET1) ratio increased 102 basis points YoY to 11.8% (Standardized)(B)
- Average Global Liquidity Sources rose $438 billion, or 78%, to a record $1.0 trillion, reflecting strong deposit balance growth(E)
- Returned $5 billion of capital to shareholders through common dividends and share repurchases
- Return on average common shareholders' equity ratio of 12.3%; return on average tangible common shareholders' equity ratio of 17.1%
- Book value per common share rose 4% to $29.07; tangible book value per common share rose 6% to $20.90
Bank of America's management commentary on their 4th quarter 2020 earnings report
From Chairman and CEO Brian Moynihan "Our team produced exceptional results this quarter: record or near-record levels of deposits, investment flows, investment banking revenue, digital users and client engagement. Meanwhile, brand loyalty, customer satisfaction and employee engagement reached new highs. "While low interest rates continued to challenge revenue, credit costs improved and we believe that progress in the health crisis and the economy point to an accelerating recovery. "The strength of our balance sheet, our complementary and diverse set of businesses, and our talented teammates position us to perform well in that environment."
From Chief Financial Officer Paul Donofrio: "Because of the responsible way we have operated the company over many years, coupled with government stimulus and strong customer liquidity, we were able to report improved asset quality metrics and lower credit costs. We saw strong growth in our capital markets and wealth management businesses, which allowed us to absorb additional expenses and still report $8.1 billion in earnings. We believe our strong balance sheet, the diversity of our business lines, and the careful way we have managed risk for many years should enable us to continue to return to our shareholders the excess capital that is not needed to support economic growth, deliver for customers and communities, invest in our future and sustain strength and stability through future economic cycles."
Bank of America (NYSE: BAC) stock price chart over the last 5 years
The image below shows the stock price history of Bank of America (BAC) over the last 5 years. And its been a very good time for Bank of America stockholders with the stock increasing by an impressive 178.9% over the last 5 years. Not the type of returns investors would say no to.
The stock of Bank of America is trading at closer to its 52 week high than it is to its 52 week low which is an indication to us that the short term sentiment and momentum of Bank of America stock is positive at this point in time.
The stock of Bank of America is trading at closer to its 52 week high than it is to its 52 week low which is an indication to us that the short term sentiment and momentum of Bank of America stock is positive at this point in time.
Bank of America (BAC) vs Citigroup (C) vs JPMorgan (JPM) stock over the last 5 years
The image below shows the stock price performance of Bank of America (BAC), Citigroup (C) or JPMorgan (JPM) over the last 5 years. All of these firms are giants in the US banking and financial services sector. While they all operate in the financial services sector their stock price trends and returns over the last 5 years is very different. The summary below shows the stock price returns of the three financial services providers over the last 5 years, sorted from best to worst performer:
So Bank of America has been by far the best performer over the last 5 years while Citigroup has been by far the worst.
- Bank of America (BAC): 178.9%
- JPMorgan (JPM): 143.7%
- Citigroup (C): 62.6%
So Bank of America has been by far the best performer over the last 5 years while Citigroup has been by far the worst.
Bank of America (BAC) latest stock valuation
So what is Bank of America stock worth based on the release of their 1st quarter 2021 earnings report? Based on Bank of America's latest earnings report our valuation models provide a target price (full value price) for Bank of America stock at $41.20 a stock. We therefore believe that the stock of Bank of America is slightly undervalued at its current price of $39.88
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $41.20. Therefore we believe a good entry point into Bank of America stock is at $37 or below. We expect the stock of Bank of America to trade in a narrow range around its current price in coming weeks and months.
Since the stock of Bank of America (BAC) is trading at close to our target price we rate the stock of Bank of America as a hold
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $41.20. Therefore we believe a good entry point into Bank of America stock is at $37 or below. We expect the stock of Bank of America to trade in a narrow range around its current price in coming weeks and months.
Since the stock of Bank of America (BAC) is trading at close to our target price we rate the stock of Bank of America as a hold
Next earnings release date for Bank of America
It is expected that Bank of America (BAC) 2nd quarter 2021 earnings report will be released in the middle of July 2021