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.