Bank of America: Q4 Worse Than JPMorgan's But Stock Is Cheaper
(Preview) Company Update (BAC US) (Buy)
Summary
Bank of America's results on Friday were in line with our investment case, with ROTCE exceeding 15% in both Q4 and the full year.
Net interest income, benefiting from rate hikes, grew by 22% in 2022 and is expected to grow another 10% in 2023.
The overhead ratio improved and is expected to improve again next year; reserves are now sufficient for a mild recession in 2023.
BAC has benefited less from rate rises than JPM and has a lower return on equity, but BAC stock is cheaper at 1.6x versus JPM's 2.0x.
With shares at $35.23, we expect a total return of 62% (18.5% annualized) by the end of 2025. The dividend yield is 2.5%. Buy.
Introduction
We review our Bank of America investment case after Q4 2022 results on Friday (January 13). BAC stock initially fell at market open but finished the day up 2.2%.
BAC stock has gained 35% (including dividends) since we initiated our Buy rating on Seeking Alpha in October 2019. However, relative to a year ago, the share price is currently 24% lower, e…