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BofA's Expense Control Aiding Growth, Margin Woes Linger
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On Sep 8, 2016, we issued an updated research report on Bank of America Corporation (BAC - Free Report) . Declining expenses as well as persistent efforts to improve loan and deposit balances support BofA’s financials. Yet, margin pressure and a stressed energy portfolio are likely to hamper revenue growth in the near term.
Consistent fall in expenses has been supporting BofA’s bottom line. Driven by the success of its cost-saving plans, the company has been witnessing downward trend in the same since 2014. Moreover, management projects to maintain core expenses below $13 billion on a quarterly basis in 2016.
Further, BofA remains focused on improving its balance-sheet position. The company has been constantly lowering its long-term debt, while at the same time improving loan and deposit balances. With economic recovery, these initiatives will support BofA’s overall growth.
Notably, all these efforts seem to have cheered investors. Therefore, BofA shares have surged nearly 20.7% over the last six months.
However, BofA’s deposit re-pricing pressure and lower loan levels are exerting pressure on net interest yield. The uncertainty over the timing of the next hike in interest rates by the Federal Reserve has also added to its woes.
Also, continued volatility in oil prices have led to a stressed energy lending portfolio. BofA’s energy-related exposure was 4.3% of the total commercial credit exposure, as of Jun 30, 2016. Though the situation has marginally improved, the stressed energy sector will weigh on the company’s overall asset quality in the near term.
Notably, over the past 30 days, the Zacks Consensus Estimate for 2016 and 2017 remained stable at $1.27 and $1.55, respectively.
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BofA's Expense Control Aiding Growth, Margin Woes Linger
On Sep 8, 2016, we issued an updated research report on Bank of America Corporation (BAC - Free Report) . Declining expenses as well as persistent efforts to improve loan and deposit balances support BofA’s financials. Yet, margin pressure and a stressed energy portfolio are likely to hamper revenue growth in the near term.
Consistent fall in expenses has been supporting BofA’s bottom line. Driven by the success of its cost-saving plans, the company has been witnessing downward trend in the same since 2014. Moreover, management projects to maintain core expenses below $13 billion on a quarterly basis in 2016.
Further, BofA remains focused on improving its balance-sheet position. The company has been constantly lowering its long-term debt, while at the same time improving loan and deposit balances. With economic recovery, these initiatives will support BofA’s overall growth.
Notably, all these efforts seem to have cheered investors. Therefore, BofA shares have surged nearly 20.7% over the last six months.
BANK OF AMER CP Price
BANK OF AMER CP Price | BANK OF AMER CP Quote
However, BofA’s deposit re-pricing pressure and lower loan levels are exerting pressure on net interest yield. The uncertainty over the timing of the next hike in interest rates by the Federal Reserve has also added to its woes.
Also, continued volatility in oil prices have led to a stressed energy lending portfolio. BofA’s energy-related exposure was 4.3% of the total commercial credit exposure, as of Jun 30, 2016. Though the situation has marginally improved, the stressed energy sector will weigh on the company’s overall asset quality in the near term.
Notably, over the past 30 days, the Zacks Consensus Estimate for 2016 and 2017 remained stable at $1.27 and $1.55, respectively.
Currently, BofA carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked banking stocks include Comerica Incorporated (CMA - Free Report) , A Hancock Holding Company and Enterprise Financial Services Corp. (EFSC - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>