Introduction
As
the name suggests, Bank of America (BAC) is an American
multinational and financial services banking corporation. It began as the small
regional North Carolina National Bank and has now evolved and grown into not
only one of the largest financial institutions in the US by assets but also in
the world, providing services to clients and customers spanning over 145
countries. The bank’s clientele includes
private customers, SMEs and SMMBs (small-and middle-market businesses) as well
as multinational corporations with a complete set of banking, investment,
managing assets and other products and services related to risk
management. After acquiring Merrill
Lynch at the start of 2009, BAC entered the group of the world’s elite wealth
management firms and is at the forefront of corporate and investment banking
and commerce.
Recent Bank of America stock
news shows that the bank is having a strong performance in the stock market and
those looking for stocks to invest in will do well to give BAC stocks a look or
consideration. The following are a few reasons why:
Strong Capital Base
BAC is formidably
capitalized such that it does not need to raise any new capital, which makes it
a less dangerous option. Moreover, BAC’s aggressive efforts to concretize and
ensure financial discipline by restructuring, cost cutting, and sales of
assets, gives BAC stock prices a strong base. Actually, BAC stock analysis and
stock estimates indicate that the firm is well on schedule to cut about US$8
billion in yearly cost by the end of the 2nd quarter in 2015. The upshot of
this commitment is that BAC’s Tier 1 Capital Ratio, the financial and banking
sector’s measurement of financial soundness and stability, at 9.94% as at the
4th quarter of 2013, puts it at the top of the list of the largest banks in the
US. Therefore, when looking for a financially strong bank, Bank of America Corp
fits the bill.
Book value per stock
Another reason why BAC stocks are a strong option come in
the form of the bank’s real book value per stock, which as of the 3rd quarter
of 2013, was at US$13.62, signifying a reasonable 2.3% increase in comparison
with 2nd quarter figures of the same year and a percentage increase on 3rd
quarter numbers of 2012. BAC stock analysis indicate an upward performance
potential for its overall book value as a result of discount schemes offered on
its tangible book value. The bank’s total book value per stock rose by 1.6%
coming in at US$20.50 in the 3rd quarter of last year compared to the previous
quarter, and increased by 0.5% over 3rd quarter figures for the year
before. With BAC stock price currently
at US$16.70, the bank is trading at over 6% premium to real book value and at
more than 29% discount on overall book value per stock.
Share
performance
Over
2013, Bank of America Corp stocks rose 51% and are current trading at a premium
to real or tangible book value per stock. Compared to other companies like J.P.
Morgan Chase (JPM), Goldman Sachs and Wells Fargo, the BAC stocks still have
some ways to go to top these firms or catch up with them. This is due to the
fact that BAC has been through some difficult times based on astonishing
provision expenditures and charge-offs. Of course, BAC stocks, in terms of book
value, were not aided by the bank’s nationwide acquisitions. However, with a 51% increase in the previous
year, Bank of
America Corp stock analysis indicates a strong performance and certainly a
healthy stock to hold.
Stable
Fund
BAC
stock news and other underlying market information and trends show that the
company is on track to return to its primary revenue earning potential. BAC has
posted some very positive numbers in the last couple of years. The banks
overall loan facilities and leases grew to US$934.4 billion and increased by
1.4% in the 3rd quarter of 2013. There
was reasonable growth across board in the BAC franchise, which bodes well for
BAC stock prices and earnings. Deposit growth in total volume was up 2.7% in
the last quarter of 2013 and over 4.4% over the previous year’s volume. The figures also indicate a strong quality in
the bank’s loan and asset facilities.
It
is common knowledge that BAC encountered serious problems concerning bad loans
due to abysmal underwriting ethics and principles. This setback have been fixed
and net charge-offs, are slowly but steadily falling and, as of the 3rd quarter
in 2013, remained at US$1.7 billion, representing a considerable jump and
improvement of 59% and there are indications that the trend will be the same
for the foreseeable future. The astonishingly massive losses of credit provisions
witnessed in 2012, particularly in the 4th quarter, of US$2.2 billion
(approximately minus 86%) and also in the 3rd quarter of the same year of
US$1.8 billion (approximately minus 83%) seems to be a thing of the past as
such losses dropped sharply, standing at US$0.3 billion as of the 3rd quarter
of last year. Compared to the 2nd quarter of last year alone, credit provision
losses fell by as much as 75%. This shows that bank has clearly made genuine
strides in arresting its quality asset maladies.
Significant
Sector Results
BAC
sector performances have also done the bank’s stocks a world of good. The
Consumer and Business Banking sector have posted higher earnings at the back of
lower provision expenditures, thereby increasing net income by 28% to US$1.8
billion as of the 3rd quarter of 2013. On the other hand, the
Consumer Real Estate Service sector came in with a net loss of $1 billion
accounted for by a lower industry’s mortgage banking revenues and increasing
market litigation costs. Revenue of US$$4.4 billion represented a US$0.7 billion
net income from BAC’s Global Wealth and Investment Management unit by the same
period of last year. There was also a 5.5% year on year average deposits growth
to US$239.8 billion in the Global Banking unit and the global market sector
witnessing an equity earnings increase of 36% year on year in 2013. With these
numbers BAC stocks represent a strong investment option.
In
conclusion these reasons among others make Bank of America Corp stocks a
considerably solid option. Analyst across board expects a strong performance
from the company in 2014 and investors will do well to keep an eye on the
company’s stocks and, if possible, invest in them.
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