BAC | Q4 2023 Earnings Preview

Zacks's earnings consensus is 68 cents per share, down 20% from the previous year, while revenues are seen at $24 billion, down 2.3% from the same period in 2023. According to data from Benzinga, analysts expect the bank to report quarterly earnings of 67 cents per share on revenue of $23.92 billion. Analysts at Seaport Res Ptn have reduced their EPS estimates for Bank of America in Q4 2023 to $0.72, down from a previous estimate of $0.74. This reduction is based on a consensus estimate for the full year's earnings being around $3.41 per share.

 

We are entering 2024, which is expected to be a challenging year with a slowing global economy, cuts in interest rates, continuing geopolitical tensions, and all the mentioned issues expected to negatively affect banking earnings. Moody’s — The rating agency has a negative view of banks, as the operating environment is deteriorating and growth remains sluggish. “Funding and liquidity will pose challenges, but capitalization will remain stable, benefiting from organic capital generation and moderate loan growth as some of the largest US banks build up capital.”

 

However, looking at 2023, the share price performance for the banks has varied widely. JPM had the best outperformer with a 26.9% gain over the past year, while BAC, with only a 0.9% gain, had the worst performance of 2023. Overall, the financial industry increased by 9.3% in the last year. Based on that, while for 4Q 2023, we expect most major US banks to turn in positive revenue growth, Bank of America is expected to have a negative top-line growth of -2.6%.

 

Still, since bond yields have been falling in the last quarter from the peak of 5.02% to around 4%, pressures on the bank’s funding costs can also ease, which can be a positive point for BAC as well. In the following, we will discuss the points that should be paid more attention to in this report.

 

Net Income and Adjusted EPS: Wall Street's consensus is that Bank of America's net income will decline by 5.2% year-on-year in the fourth quarter, amounting to $6.6 billion. The adjusted EPS is also expected to fall to $0.67–$0.78. It is clear that reports better than this expectation will help the share price rise.

 

Revenue and Income Streams: The bank's net interest income is projected to grow almost 30% from the previous year, reaching $14.95 billion. However, non-interest income is expected to drop by 12.4% to $9.33 billion. This decline is attributed to lower income from consumer and global banking units, as well as its wealth and asset management arm.

 

Provisions and Charge-Offs: Provisions for loan losses, which cover potentially bad loans, are expected to be around $1.02 billion, significantly impacting the bottom line. Net charge-offs are anticipated to increase by 77% from the previous year to $639.6 million.

 

Operational Costs: Non-interest expenses are forecast to rise by 4.4% in the fourth quarter, further affecting the bank's profitability negatively.

 

Deposits and Loans: The bank is witnessing a decline in deposits, forecasted to be 7.3% lower than the same quarter in 2022, while loans are expected to rise by 6.5%.

 

Future Earnings Outlook: The outlook for future earnings is very important for investors. Usually, investors consider it very important to decide where to put their money. These insights will provide a comprehensive picture of the expected financial performance of Bank of America for 2024, highlighting both the challenges and potential areas of growth.

 

While from a fundamental point of view and based on the mentioned points, BAC shares the recommendation of holding, from a technical point of view, we are at the beginning of an uptrend, while the 20DMA cuts upwards the 50DMA. However, $33 is a risky level since MACD histograms that are under the 0-level at the moment with a share price under $33 can go further. The first support sitting at $31..45 and breaching under that can put the $29 on the radar.