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Bank of America Corp BAC

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Morningstar’s Analysis

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Strong Fees and Net Interest Income Come Through for Bank of America in Third Quarter

Eric Compton, CFA Senior Equity Analyst

Analyst Note

| Eric Compton, CFA |

Wide-moat-rated Bank of America recorded solid third-quarter earnings, beating the FactSet consensus EPS estimate of $0.71 with a reported EPS of $0.85. This equates to a return on tangible common equity of 16%. Like peers, Bank of America is seeing historically strong credit quality as net charge-offs fell to 20 basis points of average loans—a 50-year low. Asset improvements led to a provision benefit of $624 million and a $1.1 billion release in reserves. Credit wasn’t the only item that outperformed our expectations, as wealth management and investment banking fees came in ahead of our projections. The bank also seems poised to reach its goal of gaining an additional $1 billion in its quarterly net interest income run rate by the fourth quarter, which we thought the bank might miss. After increasing our net interest income and fee projections, we are increasing our fair value estimate to $38 per share from $35.

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Company Profile

Business Description

Bank of America is one of the largest financial institutions in the United States, with more than $2.5 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking, and global markets. Bank of America's consumer-facing lines of business include its network of branches and deposit-gathering operations, home mortgage lending, vehicle lending, credit and debit cards, and small-business services. The company's Merrill Lynch operations provide brokerage and wealth-management services, as does U.S. Trust private bank. Wholesale lines of business include investment banking, corporate and commercial real estate lending, and capital markets operations. Bank of America has operations in several countries.

100 North Tryon Street, Bank of America Corporate Center
Charlotte, NC, 28255
T +1 704 386-5681
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 212,000