Bank of America: Bargain at 10x P/E After 13% Decline in December

(Preview) Company Update (BAC US) (Buy)

Summary

• BAC shares have fallen 13% in December and are now at 1.55x tangible book, 10x normalized P/E and a 2.7% Dividend Yield.

• JPM stock is at a much higher tangible book multiple of 1.88x, while BAC has tended to trough at 1.4x since 2018, excluding March 2020.

• Net Interest Income is up 24% year-on-year as of Q3, thanks to the Fed’s rate hikes and the resumption of loan growth.

• Impact of Non-Interest Revenues normalizing from COVID highs should be modest; credit costs should be manageable even in a recession.

• With shares at $32.26, we expect an exit price of $56 and a total return of 82% (22.5% annualized) by the end of 2025. Buy.

Introduction

We review our Bank of America Corporation investment case after shares have fallen 13% in December so far and continued to head towards the 52-week low reached in September 2022.

BAC has been a core holding in our portfolio for more than a decade, and we initiated our coverage of BAC on Seeking Alpha with a Buy rating in October 2019. Since then, BAC…