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Category: Stock Market and Bank of America (BAC)
Date: 19 January 2021 Stock Price of Bank of America: $33.36 We take a look at the 4th quarter earnings report of their 2020 fiscal year of Bank of America, a diversified financial services company that recorded revenues of over $20.1 billion for their 4th quarter of 2020, and net income of $5.5 billion for the quarter.
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Chairman and CEO Brian Moynihan - During 2020, we witnessed the dramatic effects of the health crisis on the economy and our company's operations. In the fourth quarter, we continued to see signs of a recovery, led by increased consumer spending, stabilizing loan demand by our commercial customers, and strong markets and investing activity"
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
Data below refers to quarterly data unless specified otherwise:
- Total revenue: $20.1 billion (down from $23.3 billion for the same period of the previous year)
- Total revenue decreased by -13.7% over the last 12 months
- Total noninterest expenses: $13.9 billion (down from $13.2 billion for the same period of the previous year)
- Total noninterest expenses increased by 5.3% over the last 12 months
- Net income: $5.2 billion (down from $6.7 billion for the same period of the previous year)
- Diluted earnings per share: $0.60 (down from $0.75 for the same period of the previous year)
- PE ratio of Bank of America: 17.7
- Dividend yield of Bank of America: 2.2%
- Diluted weighted-average shares outstanding: 8.785 billion (down from 9.079 billion for the same period of the previous year)
- Book value per share: $28.72 (up from $27.32 for the same period of the previous year)
- Cash and cash equivalents: $36.4 billion
- Cash and cash equivalents per share: $4.14
- Cash and cash equivalents makes up 12.4% of Bank of America's market capital
- Cash and cash equivalents makes up 1.3% of Bank of America's total assets
- Loans net of allowances for losses: $909.1 billion
- Loans net of allowances makes up 32.2% of Bank of America's total assets
- Goodwill: $68.951 billion
- Goodwill makes up 2.5% of Bank of America's total assets
- Goodwill per stock: $7.84
- Stockholders equity in Bank of America: $272.9 billion
- Stockholders equity per share: $30.74
- So Bank of America is trading a 1.1 times its stockholders equity which is well outside the expected range of between 2 and 5 which most firms tend to trade at.
- For some perspective the average price to book value of firms in the S&P500 is 3.9
Bank of America's management commentary on their 4th quarter 2020 earnings report
From Chairman and CEO Brian Moynihan: "During 2020, we witnessed the dramatic effects of the health crisis on the economy and our company's operations. In the fourth quarter, we continued to see signs of a recovery, led by increased consumer spending, stabilizing loan demand by our commercial customers, and strong markets and investing activity. The latest stimulus package, continued progress on vaccines, and our talented teammates – who performed well helping their customers through this crisis – position us well as the recovery continues.
"In the fourth quarter, we saw higher net interest income, higher Consumer revenue, record asset management fees, strong results from our Global Markets teams, and a stronger balance sheet. In 2020, we earned nearly $18 billion and achieved several key strategic objectives: gaining market share in deposits, expanding our digital leadership, and adding thousands of wealth management clients. In addition, we gained market share in investment banking and supported clients with liquidity and superior trading execution. "Also we made progress in support of our communities, committing $300 million of our $1 billion four-year initiative to help drive racial equality and economic opportunity."
"In the fourth quarter, we saw higher net interest income, higher Consumer revenue, record asset management fees, strong results from our Global Markets teams, and a stronger balance sheet. In 2020, we earned nearly $18 billion and achieved several key strategic objectives: gaining market share in deposits, expanding our digital leadership, and adding thousands of wealth management clients. In addition, we gained market share in investment banking and supported clients with liquidity and superior trading execution. "Also we made progress in support of our communities, committing $300 million of our $1 billion four-year initiative to help drive racial equality and economic opportunity."
From Chief Financial Officer Paul Donofrio: "Despite one of the worst economic environments in modern memory, we ended the year stronger than before the health crisis and well positioned to support our clients. We grew deposits by $361 billion, improved our capital ratios and increased liquidity to record levels, exceeding loans. Because of the responsible way we have operated the company over many years, we were able to support the economy by raising $772 billion in capital on behalf of clients, invest in our franchise and still be in a position to return $4.8 billion in capital to our shareholders in the first quarter of 2021 in the form of common stock repurchases and dividends."
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 172.2% 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 low than it is to its 52 week high which is an indication to us that the short term sentiment and momentum of Bank of America stock is negative at this point in time.
The stock of Bank of America is trading at closer to its 52 week low than it is to its 52 week high which is an indication to us that the short term sentiment and momentum of Bank of America stock is negative 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): 172.2%
- JPMorgan (JPM): 136.7%
- Citigroup (C): 64.3%
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 3rd quarter 2020 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 $32.80 a stock. We therefore believe that the stock of Bank of America is slightly fully valued at its current price of $33.36
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 $32.80. Therefore we believe a good entry point into Bank of America stock is at $29.50 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 $32.80. Therefore we believe a good entry point into Bank of America stock is at $29.50 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) 1st quarter 2021 earnings report will be released in the middle of April 2021