Bank of America: Clear Buy After Q2 Shows Net Interest Income Accelerating
(Preview) Company Update (BAC US) (Buy)
Summary
BAC stock has a 10x P/E and a 2.7% Dividend Yield after losing 27% year-to-date. Q2 results showed it is too cheap at 1.5x Tangible Book.
Excluding credit provisions and tax, profits were up 15.5% year-on-year in Q2; Return on Tangible Common Equity was 14.1%.
Net Interest Income grew strongly, thanks to good loan growth and higher rates, and guided to accelerate further in Q3 and Q4.
Expenses were flattish, credit losses were limited. Dividend hikes and buybacks are continuing despite higher capital requirements.
With shares at $32.26, we expect an exit price of $56 and a total return of 87% (20.7% annualized) by the end of 2025. Buy.
Introduction
Bank of America released Q2 2022 results on Monday (July 18). BAC stock finished the day roughly flat (up 0.2%), having already rebounded by 7.0% on Friday.
Q2 results support our investment case, with Return on Tangible Common Equity at 14.1% after a minimal reserve release. Net Interest Income grew strongly with good loan growth and highe…