Bank of America: Net Yield & Loan Growth Turned The Corner In Q3

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

Summary

• BAC released Q3 2021 results this morning that support our investment case; shares are currently up 2.9% in pre-market trading.

• Pre-Provision Pre-Tax Profit, which excludes one-off reserve releases, is up 30% from Q2 and up 40% year-on-year, as growth continues.

• Net Interest Income was up 8.4% from Q2, with both Net Yield and Loans growing for the first time since COVID-19; more should follow.

• Non-Interest Revenues grew, as BAC had less of a cyclical peak than peers; flat expenses point to future operational leverage.

• With shares at $43.14, we expect an exit price of $56 and a total return of 41% (11.8% annualized) by 2024. The Dividend Yield is 1.9%. Buy

Introduction

We review our Bank of America investment case after Q3 2021 results this morning (October 14). At the time of writing (9:30 am EST), while the earnings call is in progress, BAC shares are up 2.9% pre-market.

Bank of America has been a core holding in our portfolio for more than a decade, and we initiated our coverage of …