Bank Of America: Upside Potential Still Strong After Q1 2021

Company Update (BAC US) (Buy)

Summary

• We significantly raise the estimates in our BAC investment case, having reviewed Q1 2021 results from last Thursday

• Net Interest Income already grew on an adjusted basis in Q1; management guided to more growth and lower Expenses to come

• BAC can still grow its balance sheet and earnings, unlike JPM; we now expect BAC’s long-term ROTCE to be 16%

• Earnings growth opportunities include higher interest rates, loan growth, investment banking expansion and better Efficiency Ratios

• With shares at $39.15, we expect an exit price of $54 and a total return of 51% (12.0% annualized) by 2024. Buy

Introduction

We significantly raise the estimates in our Bank of America investment case, having reviewed Q1 2021 results from last Thursday (April 15).

We originally initiated a Buy rating on Bank of America stock on Seeking Alpha in October 2019, and reiterated it multiple times. So far BAC shares have gained 44% (including dividends), slightly ahead of the S&P 500, despite the COVID-19 outbreak. 

In this…