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Category: Stock Market and Bank of America
Date: 16 January 2020 Stock Price: $34.67 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Bank of America, a diversified financial services company that recorded revenues of over $91 billion for their 2019 fiscal year.
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About Bank of America
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 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Total revenue: $22.3 billion (down from $22.7 billion for the same period of the previous year)
- Total revenue decreased by 1% over the last 12 months
- Total noninterest expenses: $13.2 billion (up from $13.1 billion for the same period of the previous year)
- Total noninterest expenses increased by 1% over the last 12 months
- Net income: $7 billion (down 4% from $7.3 billion for the same period of the previous year)
- Diluted earnings per share: $0.74 (up 6% from $0.70 for the same period of the previous year)
- PE ratio of Bank of America: 12.6
- Dividend yield of Bank of America: 2.1%
- Diluted weighted-average shares outstanding: 9.079 billion (down 9% from 9.996 billion for the same period of the previous year)
- Book value per share: $27.32 (up 8.7% from $25.13 for the same period of the previous year)
- Cash and cash equivalents: $30.152 billion
- Cash and cash equivalents per share: $3.32
- Cash and cash equivalents makes up 9.5% of Bank of America's market capital
- Cash and cash equivalents makes up 1.23% of Bank of America's total assets
- Loans net of allowances for losses: $974.010 billion
- Loans net of allowances makes up 40% of Bank of America's total assets
- Goodwill: $68.951 billion
- Goodwill makes up 2.83% of Bank of America's total assets
- Goodwill per stock: $7.59
- Stockholders equity in Bank of America: $264.810 billion
- Stockholders equity per share: $29.16
- So Bank of America is trading a 1.18 times its stockholders equity which is well outside the expected range of between 2 and 4 which most firms tend to trade at.
Bank of America's management commentary on their 4th quarter 2019 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.”
Commentary from Chief Financial Officer Paul Donofrio: “The company managed well through a period of transition from rising rates to lower rates over a short period of time. Solid client activity in growing loans and gathering deposits helped us offset spread compression. We also are aided by diverse lines of business and operations, with noninterest income comprising nearly half of our revenue.”
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
Recent coverage of Bank of America
The extract below discusses the latest regarding Bank of America as obtained from TheStreet.com
Bank of America (BAC) - Get Report is up a bit more than 1% Tuesday, a day ahead of its scheduled earnings report. Investors have reason to be optimistic, with bullish reactions to both Citigroup (C) - Get Report and JPMorgan (JPM) - Get Report after both banks on Tuesday delivered better-than-expected fourth-quarter results. Citi has hit highs as a result, while JPM is close to doing the same. Tuesday’s rally has Bank of America setting up for a potential move to 52-week highs as well, provided the results due out Wednesday morning are strong enough
Read the full article here
Bank of America (BAC) - Get Report is up a bit more than 1% Tuesday, a day ahead of its scheduled earnings report. Investors have reason to be optimistic, with bullish reactions to both Citigroup (C) - Get Report and JPMorgan (JPM) - Get Report after both banks on Tuesday delivered better-than-expected fourth-quarter results. Citi has hit highs as a result, while JPM is close to doing the same. Tuesday’s rally has Bank of America setting up for a potential move to 52-week highs as well, provided the results due out Wednesday morning are strong enough
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 4th quarter 2019 and full fiscal 2019 earnings earnings report? Based on Bank of America's latest earnings report our valuation models provide a target (full value) price for Bank of America stock at $37.40 a stock. We therefore believe that the stock of Bank of America is slightly undervalued at its current price of $34.67
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 $37.40. Therefore we believe a good entry point into Bank of America stock is at $33.70 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.
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 $37.40. Therefore we believe a good entry point into Bank of America stock is at $33.70 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.
Next earnings release date for Bank of America
It is expected that Bank of America (NYSE: BAC) 1st quarter 2020 earnings report will be released in the middle of April 2020