Bank of America Earnings: Bank Is Meeting Expectations, Net Interest Income Likely to Bottom Soon

Wide-moat-rated Bank of America reported decent third-quarter results. Deposit costs are tracking as we expected, deposits grew slightly in the quarter, and net interest income, or NII, even outperformed slightly despite minimal balance sheet growth. After some slight changes to our projections, we are maintaining our fair value estimate of $35 for Bank of America. We think the market is continuing to penalize Bank of America for its longer duration securities, and while it will be slow going for this book to gradually mature and roll off, we think the core business remains solid. We still view shares as moderately undervalued, being slightly cheaper than peer JPMorgan but not quite as cheap as the peers in turn-around mode.