Bank of America (BAC) Earnings: Is It Still a Buy?

BAC shares' current price of $41.8 is its two-year high but still less than its record high of almost $50 in February 2022. While it could beat all past four quarters' estimates, we expect less income and EPS compared to its previous quarter, as they earn less from interest payments and set aside more money to cover deteriorating loans. In Q1 2024, Bank of America reported $0.83 EPS on $25.80 billion in revenue.

 

From a macroeconomic point of view, we are at the last stages of recovery before we get into normal economic conditions, with an inflation rate of about 2% and an unemployment rate between 3.5% and 4%. In this stage, higher inflation for a long time has affected the market, and we can see more companies struggling to repay their loans, leading to a higher number of bad loans, which directly affects the banks' income. However, with still higher rates, they can compensate for their losses with the profits they get from high interest rates.

 

C&I loans pose greater risks to major banks than they did in 2023, according to the Federal Reserve's latest health check last month. Under the Fed's stress-test scenario, C&I loss rates are projected to rise to 8.1% from 6.7% in last year's exam.

 

The bank expects Net Interest Income (NII) to decline modestly to about $14 billion. The Zacks Consensus Estimate for NII (FTE basis) of $14 billion suggests a 2.1% decrease from the year-ago quarter. Our estimate for NII (FTE) implies a fall of 1.6% on a year-over-year basis to $14.1 billion.

 

In addition, we expect meaningful growth in its investment banking (IB) income. The rebound in global mergers and acquisitions (M&As) in the second quarter of 2024 increased the deal value and volume. The solid stock performance is helping the bank increase its income and overcome other market risks.

 

Overall, the outlook and estimate are positive for BAC, which makes it a buy for most investors, especially for mid and long-term investment plans. From a technical point of view, BAC's trend is bullish, with strong support around $37 and a pivot point at $34. The next target is $45, and then its all-time high is around $50. A positive report can help the stock reach these levels faster.