With steady growth in the economy, lower provisions, improving asset quality, and an increase in customer base, things are finally looking up for Bank of America (BAC).
Further, the banking major recently renewed its $25 billion share buyback program, indicating that it is earning more money. The move follows Bank of America’s $10 billion worth of share buybacks in Q3.
In response to its $10 billion share buyback, Bank of America’s CEO, Brian Moynihan, stated that its third quarter’s “level of profits” and “excess capital” have helped boost shareholders’ returns through higher dividends and share repurchases.
Interestingly, Bank of America delivered a net income of $7.7 billion in Q3. Furthermore, its net income has more than doubled on a year-over-year basis, to $25 billion for the nine months of 2021. I maintain a Bullish outlook on Bank of America stock.
The strong growth in its net income reflects higher loans and lease balances, as well as increased deposits. Additionally, operating leverage and reserve releases cushioned its bottom line.
Bank of America’s CFO Paul Donofrio highlighted that Q3 revenues increased faster than expenses, leading to year-over-year operating leverage in each business division. The bank’s revenues, net of interest expenses, increased 12%. Meanwhile, its noninterest expenses were relatively flat.
Donofrio added that the bank’s asset quality remained solid, and loss rates were near 50-year lows, thus “enabling the release of loan loss reserves.”
Responding to its Q3 performance and net interest income growth, Chris Kotowski of Oppenheimer stated that Bank of America’s performance was impressive. Kotowski has a Buy rating on Bank of America stock and increased the price target to $51 (8.3% upside potential) from $48.
Along with Kotowski, investors maintain a favorable outlook on BAC stock. TipRanks’ Stock Investors tool indicates sentiment of investors who hold portfolios on TipRanks is Very Positive.
Overall, Bank of America stock sports a rating consensus of Moderate Buy, based on 8 Buys, 4 Holds, and 1 Sell. Meanwhile, BAC scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that it is likely to outperform the market.
The average Bank of America price target of $47.42 implies a 1% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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