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Bank of America: Stability Shown in Q2, P/E Still Less Than 10x

Bank of America: Stability Shown in Q2, P/E Still Less Than 10x

Company Update (BAC US) (Buy)

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Librarian Capital
Jul 19, 2023
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Librarian Capital's Research Library
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Bank of America: Stability Shown in Q2, P/E Still Less Than 10x
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Highlights

  • ROTCE was 15.5% in Q2, above our assumption but down q/q

  • NII fell 2% sequentially but is guided to be more stable in H2

  • Expenses will continue falling in H2, credit costs are still modest

  • At $30.70, P/TBV is 1.32x, P/E is <10x and Dividend Yield is 3.1%

  • We expect a total return of 71% (25% p.a.) by end of 2025. Buy

Introduction

Bank of America (“BAC”) released Q2 2023 results on Tuesday (July 18). Shares finished the day up 4.4%, taking them back to their level before the U.S. regional banking crisis began in March, though still down 8.0% in the past year:

BAC Share Price (Last 1 Year)

Source: Google Finance (18-Jul-23).

We have followed BAC and other U.S. banks for more than a decade, and first published our research on BAC online with a Buy rating in October 2019. At present, BAC shares have gained just 21.0% in roughly 4 years since our initiation, largely due to a reversal since the start of 2022 during which the share price has fallen 31.0%.  

We believe BAC shares continue to be…

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