Skip to Content
Stock Analyst Update

Solid 2nd-Quarter Results for Bank of America

We are maintaining our fair value estimate for the narrow-moat firm.

Mentioned:

Narrow-moat  Bank of America (BAC) continued its solid results in the second quarter. Expense declines continued while revenue stayed fairly stable, leading to the efficiency ratio improving to 58.4% this quarter on a fully taxable-equivalent basis from 60.6% in the second quarter of 2017. Credit quality was superb with provisioning remaining range-bound, and net interest income still managed moderate growth, at 6% year over year. The bank reported a 1.17% return on average assets and a 15.2% return on tangible common equity as a result, fairly close with last quarter’s results. We are maintaining our fair value estimate of $29 per share.

Consumer Banking performance was a major contributor to the strong performance in the quarter. The segment continued its steady, upward climb as net interest income was up 11% year over year, and noninterest income was up roughly 1.7%, with card income up over 7%. The most impressive number has been the expense control, with noninterest expense down year over year, supporting a consistently improving efficiency ratio. Brokerage assets also continued to climb for the segment, and deposits and loans were up as well, although loan growth was fairly limited at only 1.6% annualized for the quarter. With the bank continuing to invest in efficiency and technology gains, we would expect this segment to continue its improved performance over the medium term.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Eric Compton does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.