Tag Archives: Bank of America

Dividend Stocks, Financial Stocks

BAC: Bank of America Trades Near Inflection Point

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BAC: Bank of America Trades Near Inflection Point

Throughout nine months which has been brought to an end on 30 September, Bank of America (BAC) has generated net income by 162.16% to $7.17B. The net income has increased by 6.43% to $7.18B. On top of all of that, the company has $184.86B worth of cash and due from banks, 8 times higher than from the cash & due from banks of its no.1 competitor which is J.P. Morgan Chase & Co (JPM).

Bank of America is with Wells Fargo having the better current ratio and quick ratio among the top four money center banks as compared to J.P. Morgan Chase and Citigroup. The current ratio and quick ratio of the company evidently manifested the firm capability of the company to shoulder all their debts. As having total assets of $2,338.83B and the current ratio of 11.82, the company will surely be secured from its debts to the upcoming quarters.

In addition to that, Bank of America has achieved a gearing ratio of 1.59. Therefore, the firm’s management will be funded by the equity capital against the creditor financing and highly leveraged because it is higher than 50%.

Key financials

The target price/current last sale’s percent of the target price is $ 52 / 208%, which means the firm had achieved as twice as its aim price as well as it also endured its competitors to this point. The company’s earnings per share have an amount of $8.07.

This is a clear manifestation of the company’s strong profitability which will continue in the future due to their effective operation. Furthermore, we can say that investors can expect to earn more because the price-earnings ratio is $13.43.

 Bank of AmericaJPMorgan Chase Wells FargoCitigroup
Total Cash & Due from Banks184.86B23.23B18.79B25.727B
Total Debt417.35B516.37B326.77B444.93B
Other Earning Asset972.52B105.45B 779.231B1057.52B
Debt to Equity 159.20%199.40%164.42%225.85%
Total Short-Term Debt 200.64B 246.24B105.45B209.68B
Current Port. of LT Debt/Capital Leases 4.88B –––
Total Long-Term Debt211.84B270.12B221.32B235.26B
Current Ratio(Industry)11.820.6911.821.69
Quick Ratio(Industry)11.771.6911.770.69
Return on Equity 9.73%12.84%10.39%8.46%
Debt Ratio 0.890.900.890.90
Working Capital262.16B258.96B198.741197B
Return of Asset1.10%1.22%1.29%0.92%

The 28 forecasters proposing 12-month price forecasts for Bank of America Corp have a median target of 34.75, with a high approximation of 40.00 and a low estimate of $28.00. The median estimate shows a +24.60% growth from the previous price of $27.89.

The recent consent from 30 polled investment forecasters is to buy stock in Bank of America Corp. This assessment has held steady since October when it was unaltered from a buy rating.

Biggest Quarterly Profit in Bank of America’s History

Bank of America has made everyone in awe once more as it pulled out a profit worth $6.9 Billion after 3 quarters of 2018, as it had overcome its personal best attained during 2011.

After compensating $1.5 Billion to President Trump as income tax which is 26% earlier, the company has still envisioned its upcoming success. The company has been advantageous with the law reforms regarding taxes from the rate of 30% plummeted down to 26%. As a result, it has become exultant with the pretax income risen up to 15% whereas revenues up to 4%.

Technological Investment of $500 Million for Innovation and Sales

As Bank of America shut down its branches to different locations and closed its doors to its employees, it has still found and developed ways to reach out for its beloved customers as it enhances the services through technological advancement. Bank of America proposed to open over 500 new US bank branches in the next four years which will cover 88% GDP. Modifications in terms of technology and interior aesthetics will happen with over 1,500 branches and 5,400 certified financial planners will aid the support in the long run.

Final verdict

As the Bank of America has exceeded the expectations by boosting 9% rise in its consumer loan business, reported fourth-quarter earnings of 2017, the corporation could not be contented with the positive response. Even though the year has been good to Bank of America, we could still give them an affirmative assessment and rate “buy” as well.


Market News, S&P 500

Financial Stocks and Federal Reserve Monetary Policy

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Bank of America: Financial Stocks and Federal Reserve Monetary Policy

  • The financial sector is rallying strongly, and Bank of America is leading the pack higher.\
  • But all eyes are on US President Donald Trump in his next selection for leader of the Federal Reserve.
  • These rallies could be at risk depending on the outcome, and shareholders in BAC could be some of the most deeply impacted if certain monetary approaches are favored in Trump’s selection.  

Stock markets continue to push in their upward surge and some of the strongest names over the last three months can be found in the financial sector.  Leading the pack higher in Bank of America Corp (BAC), which is a stock that we originally bought on the drop to $15 in a trade that is now showing profits of roughly 75% (not including dividends).   

The stock recently experienced the major range breakout that we were expecting, and investors that are long the stock will now need to gauge the likely monetary policy direction that is likely to be taken by the Federal Reserve as a means for understanding how to position going forward.  This is a factor that is more likely to influence financial sector trends more than any other single element in the equation, and Bank of America could be used by the market as a proxy for expressing any significant changes in the outlook.  

Stock Trade Ideas

Our stance is to remain long BAC but with the understanding that adjustments might need to be made if a move dovish monetary policy stance is signalled by Donald Trump’s next selection for leader of the Federal Reserve.

On a year-to-date basis, Bank of America has soundly outperformed the market with stock gains of nearly 26%.  We can compare this to the SPDR S&P 500 ETF (SPY), which has moved higher by only 15% for the period even though the broader environment has been characterized by optimism over tax reform and a pro-growth agenda for the US economy.  

Global Interest Rates

The disconnect here is significant, as it underscores the majority expectation for higher interest rate into 2018.  There are valid arguments in both direction with respect to whether or not these initial expectations have actually been satisfied.  But the real questions here lie in the monetary policy direction that will be undertaken by the Fed once its new leadership regime takes control.  

Currently, markets are dealing with three possibilities as Fed Chair (John Taylor, Jerome Powell, or the continuation of Janet Yellen in her current position).  There are very different implications here depending on which economist is ultimately selected, and those long BAC will almost certainly feel the resultant volatility in their positions over the next few weeks.

BAC Earnings Data: Yahoo Finance

Higher interest rates generally make it easier for banks to drive revenues and improve margins, but the policy course that has been taken by Janet Yellen has been far more dovish than many analysts initially anticipated.  We have seen conflicting commentaries from US President Donald Trump with respect to his assessment of Yellen’s approach to the economic recovery.  

But, over time, it has started to look as though Trump does favor this supportive stance as it is more likely to drive consumer spending and help stock markets maintain their record highs.  But, at the same time, Trump has shown an interest in appointing more hawkish names (i.e. Taylor and Powell).  

Fed Policy Direction

On the spectrum from most dovish to most hawkish, this list of possibilities moves from Yellen to Powell to Taylor and so the ultimate decision here will likely determine the trading tone that is seen for most of the first half of next year.  For BAC bulls, Taylor would likely lead to the most favorable outcome and this is important given the areas of weakness that were seen in Bank of America’s earnings report for the third quarter.  

Earnings of 48 cents per share did beat the market expectation of 45 cents (confirming the longer-term trends) but revenues were more erratic at $22.079 billion (also confirming the longer-term trends).  Trading revenues remain the central cause for concern, as annualized revenues from fixed-income trading fell a substantial 22% for the period.  

Bank of America Chart Analysis

This has put some cracks in the foundation, and the rallies in BAC could be at risk if the market if not convinced that the next Fed chief is ready to aggressively tighten policy in ways that match normalized historical trends. Given Trump’s recent comments, it would not be entirely surprising to see something of a “compromise verdict” where the US President selects Jerome Powell as Fed Chair and then appoints John Taylor in a secondary role at the central bank.  

Anything short of this is likely to lead to selling pressure in BAC.  Readjustments in our long position will be considered if an unfavorable outcome sends share prices back below 23 as it would suggest another period of consolidation that cannot be fully mitigated by the stock’s 1.73% dividend yield.  Until then, we will hold our positions and collect the dividend while the momentum is still positive.