Bank of America: Strong Q4 Earnings, On Track To Benefit From 2022 Rate Hikes

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

Summary

• BAC reported strong Q4 results on Wednesday, showing the operational drivers that will make it a key winner from 2022 rate hikes.

• Loan growth accelerated to 3.4%, with every category growing except Home Equity, and is expected to be high single digits in 2022.

• Interest income will grow $6.5bn if rates rise 100 bps, while the impact from lower markets and corporate activity should be limited.

• Expenses grew a modest 2.0% from Q3, and management expects to hold them flat in 2022, allowing strong operational leverage.

• With shares at $46.44, we expect a total return of 41% (9.4% annualized) by the end of 2025. The Dividend Yield is 1.8%. Buy.

Introduction

We review our Bank of America Corporation investment case after Q4 2021 results on Wednesday (January 19). BAC stock closed up 0.4%.

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 our initiation, shares have returned 73% (w…