Bank of America’s EPS Could Sustain Strong Growth in 2019



Stellar performance

Bank of America (BAC) recorded stellar EPS growth in 2018 due to the higher net interest income, control over costs, improved asset quality, the lower effective tax rate, and share repurchases. Bank of America’s adjusted EPS rose 43% in 2018.

We expect Bank of America to sustain the momentum in its earnings in the coming quarters. We expect the bank to report double-digit EPS growth. The higher net interest income driven by growth in lending and deposits, tight expense management, and share repurchases are expected to drive Bank of America’s bottom line in 2019. The bank lowered its average diluted outstanding share count from 11.4 billion in the fourth quarter of 2013 to ~10 billion at the end of the fourth quarter.

In comparison, share buybacks and the lower effective tax rate also supported Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo’s (WFC) EPS growth during the last reported quarter.

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Expense and efficiency

Bank of America’s tight cost control is expected to support its earnings growth in the coming quarters. In 2018, the bank’s non-interest expenses fell 2.5% YoY (year-over-year) to $53.4 billion. The efficiency ratio improved from 62.7% in 2017 to 58.5% in 2018. Bank of America’s management expects the expenses to remain largely flat in 2019 compared to 2018.

Analysts expect Bank of America’s adjusted EPS to grow little over 10% in 2019. The bank will likely maintain the growth momentum in 2020.


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