Bank of America Stock: Analyzing the Uptrend

Bank of America (BAC) has impressed investors with its financial performance in the past several quarters. The company beat analysts’ estimate on the sales and earnings front. Continued growth in lending and deposits and higher rates supported the top-line growth. Also, growth in the asset management fees and an increase in card income drove the top-line growth, which increased more than 4% to $91.9 billion in 2018.

Bank of America has managed to lower its expenses and increase its revenues, which is encouraging. Bank of America’s non-interest expenses decreased 2.5% on a YoY (year-over-year) basis in 2018 to $53.4 billion. The efficiency ratio improved significantly from 62.7% in 2017 to 58.5% in 2018.

Higher revenues and operating leverage helped the bank have strong EPS growth. The EPS has risen 43% on a YoY basis. Share repurchases cushioned the bottom-line growth rate.

We expect Bank of America to sustain the momentum in 2019. The bank’s net interest income is expected to increase even without a rate hike due to growth in loans and deposits. The operating leverage and share buybacks are expected to drive double-digit growth in Bank of America’s bottom line.

Shares of top US banks (XLF) are off to a strong start in 2019. Bank of America stock has risen 16.4% as of February 12. Citigroup (C), Goldman Sachs (GS), Wells Fargo (WFC), and JPMorgan Chase (JPM) shares have risen 20.4%, 16.4%, 6.4%, and 5.1%, respectively, on a year-to-date basis.