Bank of America reported earnings on October 14th
before the market opened. Bank of America reported EPS of $.37 which beat
estimates by $.04 and posted revenue of 20.91B which beat estimates by 140M.
Net interest income was 10.3B, and non-interest income was 11.171B. The biggest
reason why Bank of America was able to be very successful on EPS was due to
cost cutting. Noninterest expense was 13.6B fell 4% and LAS noninterest expense
excluding litigation of 900M fell 32%. Bank of America rose .8% due to the
strong earnings, and is up another 1.4% today. Many analysts are very bullish
on Bank of America, and the strong earnings in the reported “rough” conditions
banks are dealing with due to the fall of commodity prices backs up why
analysts are bullish. Bank of America is still waiting for an interest rate
hike, which would greatly benefit them. The most important thing to come out of
this earnings, the tangible book value continued to grow in the third quarter.
This is important because Bank of America has been extremely discounted
according to the price to tangible book ratio, and I believe when interest rates
increase, this discount will not exist anymore and then that will increase the
price of a share of Bank of America to our price target at $22.00. 85% of Bank
of America’s operations occur in America and protected us from a lot of the
commodity price drop, except for oil.
Over the past quarter, Bank of America dropped 5.58%, and
reached highs of 18.48 in July. Bank of America has had less fines and
litigations this past year and looks like they will be continuing to not have
these litigations. The CEO and chairman of the Board mentioned that the commodities
markets have been extremely low and it has hurt the trading revenue of Bank of
America by 5-6%. This is why the latest earnings were so surprising. Bank of
America grew their third quarter loan book which is prepping them for the
higher interest rate environment. With the economy looking at normalizing right
now, I expect interest rates to have a definite answers on being raised in
December. Bank of America has also been making smart loans because once again
their net charge offs declined again this quarter and this has been the trend
for the past year.
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