馃彟 BANK OF AMERICA: ANALYSIS 馃彟
Bank of America Corporation [BAC], through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets.
Based on a sample of the last year [2Q/24 TTM], its average margins have been:
- Net Interest income margin: ≈ 60.2%
- Non Interest income margin: ≈ 44.8%
- Net Operating Income margin: ≈ 14.6%
- Selling % Admon. Expenses margin: ≈ 15.9%
- EBT margin: ≈ 28.8%
- Net Income margin: ≈ 27.1%
Pros:
- Improvement of EPS associated to buybacks shares
- Oligopolistic position
- Increasing in provision for loan losses
Cons:
- Reduction of ROE / ROTCE
- Reduction of net income
- Decreasing of net interest income and net operating income
Based on the last report, their normalized annual EPS was ≈ $3.15 USD and its last average ROE [TTM] was ≈ 8.34%. If an average Forward PER 12.5 is set as a benchmark with an EPS intensity of ± 0.2619x, the potential forward spread target for the next 12 months could be:
- Optimistic: ≈ $49.74 USD
- Neutral: ≈ $39.41 USD
- Negative: ≈ $29.09 USD
At least, an EPS of $0.9858 USD is required for the next quarter, to keep the metrics.
In other hand, their last book value was ≈ $37.80 USD. If an average Price to Book 1 is set as a benchmark with and intensity of ± 0.2666x, the potencial spread price target for the next 12 months could be:
- Optimistic: ≈ $47.70 USD
- Neutral: ≈ $37.80 USD
- Negative: ≈ $27.9 USD
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M.F. J. Joel Padilla
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