|
Related Topics
|
Category: Stock Market and Bank of America (BAC)
Date: 15 October 2020 Stock Price of Bank of America: $23.62 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Bank of America, a diversified financial services company that recorded revenues of over $20.3 billion for their 3rd quarter of 2020, and net income of $4.9 billion for the quarter.
|
As the economy continued to recover, we generated nearly $5 billion in earnings this quarter, reflecting the diversity of our business model, our industry-leading market position and digital capabilities, and our adherence to responsible growth. - Chairman and CEO Brian Moynihan "
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 3rd quarter 2020 earnings report
Data below refers to quarterly data unless specified otherwise:
- Total revenue: $20.336 billion (down from $22.807 billion for the same period of the previous year)
- Total revenue decreased by -10.8% over the last 12 months
- Total noninterest expenses: $14.401 billion (down from $15.169 billion for the same period of the previous year)
- Total noninterest expenses decreased by -5.1% over the last 12 months
- Net income: $4.881 billion (down from $5.77 billion for the same period of the previous year)
- Diluted earnings per share: $0.51 (down from $0.56 for the same period of the previous year)
- PE ratio of Bank of America: 13.9
- Dividend yield of Bank of America: 3.1%
- Diluted weighted-average shares outstanding: 8.777 billion (down from 9.353 billion for the same period of the previous year)
- Book value per share: $28.33 (up from $26.96 for the same period of the previous year)
- Cash and cash equivalents: $32.922 billion
- Cash and cash equivalents per share: $3.75
- Cash and cash equivalents makes up 15.9% of Bank of America's market capital
- Cash and cash equivalents makes up 1.2% of Bank of America's total assets
- Loans net of allowances for losses: $935.576 billion
- Loans net of allowances makes up 34.1% 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: $7.86
- Stockholders equity in Bank of America: $268.850 billion
- Stockholders equity per share: $30.6
- So Bank of America is trading a 0.77 times its stockholders equity which is well outside the expected range of between 2 and 4 which most firms tend to trade at.
- For some perspective the average price to book value of firms in the S&P500 is 3.7
Bank of America's management commentary on their 3rd quarter 2020 earnings report
CHARLOTTE, N.C.--(BUSINESS WIRE)--Jan. 15, 2020-- Bank of America reported its fourth-quarter 2019 financial results today.
Net income of $3.1 billion, down $332 million, or 10%, as healthy levels of client activity and spending helped mitigate the impact of lower rates • Revenue of $9.5 billion decreased 4%, driven primarily by lower NII and the absence of a small gain in 4Q18 • Provision for credit losses increased modestly to $934 million – Net charge-off ratio improved to 1.18%, compared to 1.22% • Noninterest expense increased 1%, driven by the cost of increased client activity and investments for business growth, largely offset by improved productivity and lower FDIC expense
Commentary from Chairman and CEO Brian Moynihan: “In a steadily growing economy marked by solid client activity, our teammates produced another strong quarter and year, allowing us to increase investments in our customers, communities, and employees, while keeping a close eye on expenses. We also delivered for shareholders in 2019 by returning a record $34 billion in excess capital through dividends and share repurchases. As evidenced by a quarter in which our customer deposits surpassed $1.4 trillion and client balances in our wealth management business topped $3 trillion, we enter 2020 with momentum.”
Net income of $3.1 billion, down $332 million, or 10%, as healthy levels of client activity and spending helped mitigate the impact of lower rates • Revenue of $9.5 billion decreased 4%, driven primarily by lower NII and the absence of a small gain in 4Q18 • Provision for credit losses increased modestly to $934 million – Net charge-off ratio improved to 1.18%, compared to 1.22% • Noninterest expense increased 1%, driven by the cost of increased client activity and investments for business growth, largely offset by improved productivity and lower FDIC expense
Commentary from Chairman and CEO Brian Moynihan: “In a steadily growing economy marked by solid client activity, our teammates produced another strong quarter and year, allowing us to increase investments in our customers, communities, and employees, while keeping a close eye on expenses. We also delivered for shareholders in 2019 by returning a record $34 billion in excess capital through dividends and share repurchases. As evidenced by a quarter in which our customer deposits surpassed $1.4 trillion and client balances in our wealth management business topped $3 trillion, we enter 2020 with momentum.”
From Chairman and CEO Brian Moynihan: "As the economy continued to recover, we generated nearly $5 billion in earnings this quarter, reflecting the diversity of our business model, our industry-leading market position and digital capabilities, and our adherence to responsible growth. " Our Consumer business earned $2.1 billion as asset quality remained sound and spending rebounded. Our Wealth Management business showed once again why it is an industry leader in providing timely advice and guidance to clients, and our Global Banking and Global Markets businesses continued to support the global economy by helping clients raise capital, manage risk and increase liquidity. "We also supported our communities by making progress on our $1 billion commitment to drive racial equality and issuing a $2 billion Equality Progress Sustainability Bond. I want to thank our teammates for their exceptional work under extraordinarily difficult circumstances."
From Chief Financial Officer Paul Donofrio: "The past nine months have tested us and I’m proud to say that our teammates have responded extraordinarily well – continuing to deliver for our customers, our communities and our shareholders. In addition to providing billions of dollars in credit and liquidity to clients, and committing billions more to the communities in which we live and work, we have earned more than twice our dividend in every quarter since the crisis began. Equally important, our capital position and credit reserves increased this quarter, which positions us to continue to be a source of strength for all of our stakeholders."
From Chief Financial Officer Paul Donofrio: "The past nine months have tested us and I’m proud to say that our teammates have responded extraordinarily well – continuing to deliver for our customers, our communities and our shareholders. In addition to providing billions of dollars in credit and liquidity to clients, and committing billions more to the communities in which we live and work, we have earned more than twice our dividend in every quarter since the crisis began. Equally important, our capital position and credit reserves increased this quarter, which positions us to continue to be a source of strength for all of our stakeholders."
Bank of America (NYSE: BAC) stock price history
The image below, obtained from Google, shows the stock price history of Bank of America over the last 5 years. And it's been a very good time for Bank of America stockholders. 5 years ago the stock was trading at around $15.40 a stock and its currently trading at $34.67 a stock. That's a significant return of 125.1% provided to Bank of America stockholders over the last 5 years.
The stock of Bank of America is trading at close to its 52 week high of $35.72 and is far away from its 52 week low of $26.05 which to us is a clear indication that the short term sentiment and momentum of Bank of America's stock is very positive
The stock of Bank of America is trading at close to its 52 week high of $35.72 and is far away from its 52 week low of $26.05 which to us is a clear indication that the short term sentiment and momentum of Bank of America's stock is very positive
Bank of America (BAC) vs Citigroup (C) vs Goldman Sachs (GS) stock over the last 5 years
The image below shows the stock price performance of Bank of America (BAC), Citigroup (C) or Goldman Sachs (GS) 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): 33.07%
- Goldman Sachs (GS): 7.01%
- Citigroup (C): -21.62%
So Bank of America has been by far the best performer over the last 5 years while Citigroup has been by far the worst.
Recent coverage of Bank of America
The extract below discusses the latest regarding Bank of America as obtained from Fool.com
Bank of America (NYSE:BAC) reported its third-quarter earnings on Wednesday, and it's fair to say that the market wasn't too happy with the results, as shares fell by more than 2% on the news. The most likely reason for investor disappointment was on the revenue side. Bank of America's third quarter revenue came in at $20.3 billion, a decline of 11% from the same quarter in 2019. This was mainly fueled by the record-low interest environment, as net interest income plunged by 17% year over year.
Some of the news was quite strong
Despite the light revenue, there were some positive aspects of Bank of America's earnings. For one thing, the bank earned $0.51 per share for the quarter, more than analysts had hoped for and more than enough to cover its dividend. Consumer loans were up by 5% year over year, and deposits were 21% higher than a year ago, as personal savings rates in the U.S. have spiked during the COVID-19 pandemic.
On the investment banking side of the business, Bank of America had its second-best quarter ever, with investment banking fee income 15% higher than a year ago. Asset quality was a major concern heading into the third quarter for all major U.S. banks. In consumer banking, Bank of America's net charge-off ratio actually improved from 1.18% to 0.82% in the third quarter, and the bank released some of its reserves "due to an improved macroeconomic environment and lower credit card balances." Although the Global Banking segment added to its loss reserves, the net reserve build of $417 million was still welcome news after seeing the bank set aside billions for anticipated losses in the second quarter.
At the end of the third quarter, Bank of America's book value had risen by 5% year over year to $28.33, meaning that shares are currently trading at a 14% discount to book.
The bottom line is that while the low-interest environment is certainly depressing Bank of America's revenue, there seems to be more good news than bad in the third-quarter numbers, especially from a long-term investor's perspective.
Read the full article here
Bank of America (NYSE:BAC) reported its third-quarter earnings on Wednesday, and it's fair to say that the market wasn't too happy with the results, as shares fell by more than 2% on the news. The most likely reason for investor disappointment was on the revenue side. Bank of America's third quarter revenue came in at $20.3 billion, a decline of 11% from the same quarter in 2019. This was mainly fueled by the record-low interest environment, as net interest income plunged by 17% year over year.
Some of the news was quite strong
Despite the light revenue, there were some positive aspects of Bank of America's earnings. For one thing, the bank earned $0.51 per share for the quarter, more than analysts had hoped for and more than enough to cover its dividend. Consumer loans were up by 5% year over year, and deposits were 21% higher than a year ago, as personal savings rates in the U.S. have spiked during the COVID-19 pandemic.
On the investment banking side of the business, Bank of America had its second-best quarter ever, with investment banking fee income 15% higher than a year ago. Asset quality was a major concern heading into the third quarter for all major U.S. banks. In consumer banking, Bank of America's net charge-off ratio actually improved from 1.18% to 0.82% in the third quarter, and the bank released some of its reserves "due to an improved macroeconomic environment and lower credit card balances." Although the Global Banking segment added to its loss reserves, the net reserve build of $417 million was still welcome news after seeing the bank set aside billions for anticipated losses in the second quarter.
At the end of the third quarter, Bank of America's book value had risen by 5% year over year to $28.33, meaning that shares are currently trading at a 14% discount to book.
The bottom line is that while the low-interest environment is certainly depressing Bank of America's revenue, there seems to be more good news than bad in the third-quarter numbers, especially from a long-term investor's perspective.
Read the full article here
Bank of America (NYSE: 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 $27.40 a stock. We therefore believe that the stock of Bank of America is slightly undervalued at its current price of $23.62
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 $27.40. Therefore we believe a good entry point into Bank of America stock is at $24.70 or below. We expect the stock of Bank of America to increase to levels closer to our target price (full value price) in coming weeks and months.
Since the stock of Bank of America (BAC) is trading at well below our suggested entry point we rate the stock of Bank of America as a buy
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 $27.40. Therefore we believe a good entry point into Bank of America stock is at $24.70 or below. We expect the stock of Bank of America to increase to levels closer to our target price (full value price) in coming weeks and months.
Since the stock of Bank of America (BAC) is trading at well below our suggested entry point we rate the stock of Bank of America as a buy
Next earnings release date for Bank of America
It is expected that Bank of America (NYSE: BAC) 4th quarter 2020 earnings report will be released in the middle of January 2021