Bank of America Has Fallen 11%—Can 3Q16 Boost Its Stock?



Upcoming earnings announcement

Bank of America (BAC) is expected to announce its 3Q16 results before the market opens on October 17, 2016. Wall Street analysts expect it to post earnings per share (or EPS) of $0.34, compared to $0.35 a year ago.

BAC’s net revenue is expected to be $20.7 billion in 3Q16, 1% higher year-over-year (or YoY) but 0.2% lower compared to the previous quarter.

This year has been a rough one for the financial sector. Banks (XLF) entered 2016 expecting four rounds of interest rate hikes. As we know, things haven’t turned out in their favor.

Most banks expect their earnings to improve in the third quarter, as trading activity has picked up. Further, the start of 3Q16 witnessed solid pipeline activity and improving macroeconomic fundamentals.

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Pressures of credit costs have also eased as credit quality has improved. For banks, this could result in less need for energy-related loan loss reserves, stabilizing commercial net charge-offs, and relatively stable consumer credit costs. Banks, which have been in the spotlight since the start of 2016, might see easing pressures in their upcoming results.

In 2016 so far, Bank of America’s shares have fallen 11%. Its peers Goldman Sachs (GS), Citigroup (C), and Wells Fargo (WFC) have generated returns of -11%, -12%, and -18%, respectively, so far in 2016.

Series overview

In this series, we’ll explore analysts’ expectations for Bank of America’s 3Q16 earnings. We’ll look at BAC’s 3Q16 guidance, key earnings drivers, valuations, and analysts’ ratings. We’ll also explore the impact of low interest rates and oil prices on its earnings.

First, let’s look at what the company’s management has to say about its 3Q16 earnings.


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