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Why JPMorgan is a Better Bank Stock Than Bank of America
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Rising interest rates and modest growth in loans and deposits will continue driving U.S. bank stocks. Particularly, the prospects for major regional banks look bright in the near term as their scale will help them benefit more from a steadily improving domestic economy and the impending easing of regulations. Also, continued efforts to restructure operations along with improving asset quality and capital position will keep aiding profitability growth.
The buoyancy in the major regional banking space is further confirmed by its Zacks Industry Rank in the top 17% (43 out of the 250 plus groups). Our back-testing shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2to 1.
Given the promising developments in the industry, we are today discussing two of the biggest banks in the United States — JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) — with market capitalization of $393.6 billion and $316.4 billion, respectively.
Both the companies have outperformed the industry (up 1.3%) so far this year. While shares of JPMorgan have gained 9.2%, BofA has rallied6.1%. So, JPMorgan has performed better than BofA.
Year-to-Date Price Performance
Dividend Yield
Both the banks have been meaningfully deploying capital in terms of dividend payments and share repurchases to enhance shareholder value.
Following the Fed’s approval for its 2018 capital plan, BofA announced a 25% dividend hike and $20.6 billion share repurchase authorization. Also, the bank has a dividend yield of 1.53%.
Dividend Yield
On the other hand, JPMorgan received the Fed’s approval for its 2018 capital plan that includes nearly 43% dividend hike and $20.7 billion share repurchase authorization. It has a dividend yield of 1.92%.
Dividend Yield
As you see in the above charts, both the stocks’ dividend yield is lower than the industry’s average of 2.2%. Nonetheless, JPMorgan has an edge over BofA here as well.
Leverage Ratio
Both JPMorgan and BofA have a higher debt-to-equity ratio compared with the industry average of 0.92. But BofA with a leverage ratio of 0.94 has an edge over JPMorgan with the same of 1.18.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for JPMorgan and BofA is 13.18% and 10.06%, respectively. Further, with industry’s average of 10.96%, JPMorgan is efficient in using shareholders’ funds.
Hence JPMorgan holds an edge here.
ROE
Earnings Estimate Revisions & Growth Projections
Analysts seem to be bullish on JPMorgan’s financial performance. Thus, the Zacks Consensus Estimate for 2018 earnings has moved 1.2% upward over the past 60 days. Further, the consensus estimate for earnings is pegged at $9.16 for 2018, representing year-over-year growth of 33.3%. The stock has a long-term expected earnings growth rate of 6.7%.
On the other hand, BofA’s consensus estimate for 2018 earnings has remained stable over the past 60 days. The Zacks Consensus Estimate stands at $2.52 for 2018, reflecting a year-over-year jump of 37.7%. The stock has a long-term expected earnings growth rate of 8%.
Therefore, this round is biased toward BofA.
Sales Growth Projections
For JPMorgan, the Zacks Consensus Estimate for sales is $111 billion for 2018, reflecting 11.5% rise from the prior year.
For BofA, the consensus estimate for sales stands at $91.7 billion, indicating growth of 5% year over year.
Therefore, JPMorgan has an edge here too.
Valuation
JPMorgan seems overvalued when compared with the broader industry. Its current price-to-book and PEG ratios are above than the respective industry averages.
BofA, on the other hand, seems undervalued when compared with the broader industry. Its current price-to-book and PEG ratios are lower than the respective industry averages.
So, BofA holds the edge over JPMorgan here as well.
Conclusion
Our comparative analysis indicates that JPMorgan is poised better than BofA when considering price performance, dividend yield, ROE, favorable earnings estimate revisions and sales growth expectations. BofA wins on earnings growth projections, undervaluation and superior leverage ratio.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Why JPMorgan is a Better Bank Stock Than Bank of America
Rising interest rates and modest growth in loans and deposits will continue driving U.S. bank stocks. Particularly, the prospects for major regional banks look bright in the near term as their scale will help them benefit more from a steadily improving domestic economy and the impending easing of regulations. Also, continued efforts to restructure operations along with improving asset quality and capital position will keep aiding profitability growth.
The buoyancy in the major regional banking space is further confirmed by its Zacks Industry Rank in the top 17% (43 out of the 250 plus groups). Our back-testing shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2to 1.
Given the promising developments in the industry, we are today discussing two of the biggest banks in the United States — JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) — with market capitalization of $393.6 billion and $316.4 billion, respectively.
As both the stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Both the companies have outperformed the industry (up 1.3%) so far this year. While shares of JPMorgan have gained 9.2%, BofA has rallied6.1%. So, JPMorgan has performed better than BofA.
Year-to-Date Price Performance
Dividend Yield
Both the banks have been meaningfully deploying capital in terms of dividend payments and share repurchases to enhance shareholder value.
Following the Fed’s approval for its 2018 capital plan, BofA announced a 25% dividend hike and $20.6 billion share repurchase authorization. Also, the bank has a dividend yield of 1.53%.
Dividend Yield
On the other hand, JPMorgan received the Fed’s approval for its 2018 capital plan that includes nearly 43% dividend hike and $20.7 billion share repurchase authorization. It has a dividend yield of 1.92%.
Dividend Yield
As you see in the above charts, both the stocks’ dividend yield is lower than the industry’s average of 2.2%. Nonetheless, JPMorgan has an edge over BofA here as well.
Leverage Ratio
Both JPMorgan and BofA have a higher debt-to-equity ratio compared with the industry average of 0.92. But BofA with a leverage ratio of 0.94 has an edge over JPMorgan with the same of 1.18.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for JPMorgan and BofA is 13.18% and 10.06%, respectively. Further, with industry’s average of 10.96%, JPMorgan is efficient in using shareholders’ funds.
Hence JPMorgan holds an edge here.
ROE
Earnings Estimate Revisions & Growth Projections
Analysts seem to be bullish on JPMorgan’s financial performance. Thus, the Zacks Consensus Estimate for 2018 earnings has moved 1.2% upward over the past 60 days. Further, the consensus estimate for earnings is pegged at $9.16 for 2018, representing year-over-year growth of 33.3%. The stock has a long-term expected earnings growth rate of 6.7%.
On the other hand, BofA’s consensus estimate for 2018 earnings has remained stable over the past 60 days. The Zacks Consensus Estimate stands at $2.52 for 2018, reflecting a year-over-year jump of 37.7%. The stock has a long-term expected earnings growth rate of 8%.
Therefore, this round is biased toward BofA.
Sales Growth Projections
For JPMorgan, the Zacks Consensus Estimate for sales is $111 billion for 2018, reflecting 11.5% rise from the prior year.
For BofA, the consensus estimate for sales stands at $91.7 billion, indicating growth of 5% year over year.
Therefore, JPMorgan has an edge here too.
Valuation
JPMorgan seems overvalued when compared with the broader industry. Its current price-to-book and PEG ratios are above than the respective industry averages.
BofA, on the other hand, seems undervalued when compared with the broader industry. Its current price-to-book and PEG ratios are lower than the respective industry averages.
So, BofA holds the edge over JPMorgan here as well.
Conclusion
Our comparative analysis indicates that JPMorgan is poised better than BofA when considering price performance, dividend yield, ROE, favorable earnings estimate revisions and sales growth expectations. BofA wins on earnings growth projections, undervaluation and superior leverage ratio.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>