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The Trefis price estimate for Bank of America's stock is around $37 per share
Trefis price estimate for Bank of America
In FY 2019, Bank of America reported Total Revenues of $91.24 billion, marginally lower than the previous year. It reported some growth in Core Banking revenues in 2019, which contributes the majority of the bank’s total figure, mainly driven by growth in consumer banking loans, service charges on consumer deposits and growth in treasury client assets. While the bank's trading desks did extremely well in the last quarter, the total sales & trading figure for the year was 4% lower than in 2018 due to a drop in equity trading revenues.
Going forward, we expect corporate & commercial banking business to drive revenues in the subsequent year, although lower net interest margin on consumer loans and drop in wealth management fees income could hamper its growth.
Takeaway & Earnings Summary:
Bank of America’s stock has rallied more than 44% in 2019 with the company’s share price increasing from over $24 in last January to around $35 by year-end. Further, the company’s stock price has averaged just above $33 for the year.Although the company’s stock price has seen some growth in 2019, we believe that the company’s stock still has growth potential and estimate Bank of America’s valuation to be $37 per share – 5% higher than the current market price.
Q4 2019 Earnings Summary:
In Q4 2019, Bank of America reported Total Revenues of $22.35 billion, which is slightly lower than the year-ago period.Global Markets grew by 6% y-o-y due to jump in FICC (fixed income, currency, and commodity) trading followed by a 15% increase in the “All Other” segment.However, this growth was more than offset by a 4% drop in consumer banking and a 3% decline in wealth management revenues.The company's adjusted net income margin decreased by 77 bps on a year-on-year basis, shrinking from 31.0% in Q4 2018 to 30.2% in Q4 2019.For the first quarter of FY 2020, the consensus estimate for earnings per share is in the range of $0.68 to $0.76 while net revenues are expected to remain around $23.14 billion.
Bank of America Stock (NYSE:BAC)Bank of America Revenues: How Does Bank of America Make Money?More Trefis Financial Industry Data
Bank of America is expected to report $92.4 billion in Total Revenues for 2020, which is 1% higher than the 2019 figure.Corporate & Commercial banking revenues are expected to increase by 3% y-o-y. This growth would be driven by higher treasury revenues due to a 5% growth in treasury client assetsOn the same lines, All Other Segment, which represents the firm’s Global Principal Investments, Corporate Investments, and Strategic Investments division, would grow 74% on a year-on-year basis.Consumer banking, which is the highest contributing segment, will likely report a 1% reduction in 2020 revenues due to a slight reduction in net interest income.Although wealth management business has grown by 11% over the last four years, we expect it to drop by 4% in 2020 due to lower fees as a % of Total Client Balances.Notably, Sales & Trading and Investment Banking revenues are expected to decline by 3% and 2% respectively.
#3. Deriving Bank of America's EPS Figure: The EPS figure has increased 87% from $1.47 in 2016 to $2.75 in 2019, and is expected to further grow by 13% to $3.10 by 2020.
This growth would be driven by a higher adjusted net income coupled with a steady decline in Shares Outstanding.
Adjusted EPS [A=B/C]
Adjusted Net Income [B]
Shares Outstanding [C]
Bank of America has regularly invested in share repurchase to boost shareholder returns. Its share repurchase program is likely to touch $24.6 billion for the full year 2020.
Our complete set of analyses on Bank of America
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