This paper is an analysis of Bank of America (BofA), a publicly-traded firm on the New York Stock Exchange (NYSE). The analysis includes several aspects, such as the reason for choosing BofA, opinions of articles on the stock as an investment, and its level of risk compared to other stocks. The paper details analyses of the size of BofA compared to its competitors, the firm's growth rate, profitability, price-to-earnings ratio, and its interpretation, together with the indicators of the bank's future. Further analysis on the Bank of America is its dividend yield, discussion on whether the bank's future is promising, the exchange that BofA trades & its ticker symbol, and finally a stance on recommending the BofA's stocks as investments for investors who want stocks investments.
The reason for choosing the bank of America for analysis is its global presence in over 35 nations, enormous brand value, firm global footprint status, and a large customer base over 66 million clients. BofA's eight lines of business, inclusive leadership (environmental, social governance-ESG), 66 million clientele of individuals, and companies make it worth analysis. The diversity of BofA's in wealth management, trading, corporate, and investment banking makes the analysis altogether worthwhile in depicting various aspects of companies within the banking sector.
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According to Laurence (2020), BofA stock is disinvestment, not worth committing one's resources. Laurence bewails the poor management of the payroll protection program as a put off too many small businesses that comprise a majority of the firm's clientele. Moreover, the devastating effects of the Covid-19 pandemic have led to a decline in consumer demand and business spending. As a result, BofA is taking hits in decreased/forfeited loan repayments, drop in investment banking that has led to lower underwriting and advisory fees. On the contrary, Kelly (2020), considers BofA stock an investment. Kelly details a notable growth in the sales and trading segment emanating from increased trade volumes. He projects a massive growth of BofA's stock a few months post the COVID-19 crisis. Kelly highlights that BofA is great at de-risking exposure to credit cards and mortgages evident since the 2008 crisis. Thus since a significant chunk of its loans is through credit cards, BofA will recover fast. He highlights that the current price target of $ 29.78 provides BofA's upside of 15.4%from its current $25.80 price.
Investment in BofA stock is a higher risk compared to other kinds of stock as a whole. In the current crisis, BofA will lose more monies than its peers in loan repayment defaulting than its peers considering its vast loan portfolio. The declining interest rates and reduction in economic activities hurt BofA more than it does other institutions resulting in lower revenue from capital markets and higher credit costs. However, due to the higher proportion of investing banking revenue in investment-grade debt underwriting, BofA will deliver higher returns than its peers. BofA will outperform its contemporaries by leveraging its advantage in reducing balance sheet risk, unlike its peers who currently are trading in tangible book value (Tomi, 2020).
Amongst the largest United States banks, BofA comes second after JPMorgan Chase (JPM). BofA had $ 1.85 trillion in assets and $ 1.35 in deposits in 2019 compared to JP's $2.34 trillion and $1.31 trillion in total deposits, (Bill, 2020). Other BofA competitors such as Wells Fargo, Citigroup, General Electric Co, Credit Suisse Group Ag, Visa Inc., Fortress Investment Group Llc, and others are trailing BofA in their assets and deposits. BofA is the second most significant among its competition in the United States (U.S)
BofA is growing a slow rate currently, primarily due to the effects of the Covid19 pandemic. It's still positive growth as BofA's lending profits are growing narrowly in the present-day circumstances of plunging interest rates. BofA stock climbed by 2% and has experienced a 6% increase in average leases and loans from businesses. Deposits have grown by 3%, while consumer banking experienced a 7% leap in loans (Elena, 2020). BofA's growth averaged at a 4.5% percent rate in the past year, and its book value has been growing at 15% since 2010.
Bank of America (BofA) is a profitable company. In April 2020, BofA reported a $4 billion net income equivalent to 40 cents per diluted share for its first quarter (Q1) of the year 2020. Q1's revenue was $ 22.8 billion compared to 2019's Q1 $23 billion, (Kelly, 2020). Although BofA's profitability has declined due to the Covid-19 pandemic, the firm is still profitable.
As of 16th June 2020, BofA's price-to-earnings (PE) ratio was at 10.57, implying that at current prices, purchasers pay $10.57 for each $1 in trailing annual profits (Hugh & Giel, 2020). BofA's PE is within the banking industry's 12.9, implying the bank will perform in line with other companies in its industry. The PE also shows that BofA could perform better than average in the future considering the PE is at a time of a global pandemic even though PE is not an independent determinant of the bank surpassing average growth. In the past year, BofA's PE has averaged at 12.79, which is a positive indicator.
Bank of America has a dividend. Its dividend yield on 16th June 2020 was at 2.86%, and BofA's TTM dividend payout was at 0.72% on the same date (Elena, 2020). The future of BofA is very promising evident in its vast sums of profits from its business activities. The robust business strategy, market position, and responsible growth culture make its potential increase in profitability more inevitable. Past results, such as a record of $6.9 billion in 2018's first quarter, and its sustained profitability in the current COVID-19 pandemic, are but a small indicator of a future full of promise.
BofA trades on New York’s Stock Exchange market (NYSE), and its ticker symbol is NYSE: BAC (Tomi, 2020). I strongly recommend BofA stocks as an investment for an investor who wants to carry out stock investment. BofA's stable position (ranked second in the U.S) in the market makes it a decent pick in a strong industry, and it would be unfortunate for any investor not to consider it a worthwhile venture. The robust earnings estimates revision activity of BofA in its segment compared to other sectors. It also depicts its evolution into a firm with bullish prospects in both the short and long terms. BofA's solid position within the top three in the country is an excellent indicator of certain benefits of investors that will consider it.
References
Bill, B. (2020, 24th April). A leaked audio transcript showed a Bank of America exec rejecting concerns of staff who didn't want to come to the office for fear of the coronavirus. Retrieved from Business Insider: https://www.pulse.com.gh/bi/tech/a-leaked-audio-transcript-showed-a-bank-of-america-exec-rejecting-concerns-of-staff/wtrtw4z
Elena, M. (2020, 21st April). Gold to Reach $3,000—50% Above Its Record, Bank of America Says. Retrieved from Bloomberg: https://www.bloomberg.com/news/articles/2020-04-21/bofa-raises-gold-target-to-3-000-as-fed-can-t-print-gold
Hugh, S., & Giel, D. (2020, 3rd April). Bank of America says 85,000 small businesses have asked for $22.2 billion in loans since 9 a.m. Retrieved from CNBC: https://www.cnbc.com/2020/04/03/bank-of-americas-small-business-loan-portal-is-up-making-it-the-first-bank-to-accept-applications.html
Kelly, S. (2020, 30th March). Bank of America Commits $250 Million in Capital and $10 Million in Philanthropic Grants to Community Development Financial Institutions (CDFIs) . Retrieved from Busines wire: https://www.businesswire.com/news/home/20200330005205/en/Bank-America-Commits-250-Million-Capital-10
Laurence, K. (2020, 22nd April). Bank of America President, Brian Moynihan: Please Listen To These Small Business Owners Describe BofA's Horrendous Failure To Service Payroll Protection Loans . Retrieved from Forbes: https://www.forbes.com/sites/kotlikoff/2020/04/22/bank-of-america-president-brian-monyihan-listen-to-these-small-business-owners-on-bofas--horrendous-failure-to-service-payroll-protection-loans/#5685e9fa57fa
Tomi, K. (2020, 3rd April). The Rating Game: Time to buy Bank of America stock to get 'defensive,' D.A. Davidson says. Retrieved from MarketWatch: https://www.marketwatch.com/story/time-to-buy-bank-of-america-stock-to-get-defensive-da-davidson-says-2020-04-02
