Bank of America BAC
What does Bank of America do?
Bank of America is one of the largest universal banks in the United States. It provides financial services to retail customers, small and mid-sized businesses, large corporations, institutional investors and public-sector clients. The business is divided into four segments: Consumer Banking, Global Wealth & Investment Management, Global Banking and Global Markets.
Its main sources of revenue are net interest income from loans and deposits, fees from payments, cards, asset management and investment banking, and trading revenue. In terms of competitive position, the bank is, together with a few other institutions, one of the country's systemically important large banks. Its strengths are a broad deposit base, a dense branch and digital network in retail banking, and the combination of wealth management and corporate banking, for example through the Merrill brand. Competitors include JPMorgan Chase, Citigroup and Wells Fargo.
Score profile
Rank vs. Financial Services (272 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Bank of America ranks in the middle in the group Financial Services (4.1/10). On growth, the company ranks below average in the group Financial Services (2.3/10). On valuation (higher = cheaper), the stock ranks above average in the group Financial Services (6.5/10). On financial strength, Bank of America ranks in the middle in the group Financial Services (4.8/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 9.8x | 10.9x | better than 69 % |
| Trailing P/E | 12.1x | 12.8x | better than 58 % |
| PEG ratio | 0.9x | 1.4x | better than 81 % |
| Price/sales | 3.1x | 3.4x | better than 59 % |
| Price/book | 1.3x | 1.7x | better than 68 % |
| Revenue growth | 3.4% | 6.9% | better than 35 % |
| Earnings growth | -12.5% | 8.6% | better than 12 % |
| Gross margin | 0.0% | 26.2% | better than 20 % |
| Operating margin | 31.3% | 34.9% | better than 46 % |
| Net margin | 28.1% | 23.3% | better than 59 % |
| Return on equity | 10.7% | 13.1% | better than 37 % |
| Debt/equity | 0.0% | 17.4% | better than 80 % |
| Free cash flow yield | 0.0% | 0.0% | better than 33 % |
| Dividend yield | 2.5% | 2.4% | – |
| Payout ratio | 27.6% | 31.0% | – |
| Beta | 1.19 | 0.87 | – |
Valuation: what is Bank of America worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Bank of America a model range of 56.29 USD to 65.24 USD per share.
22 analysts, average rating “Strong buy”, average price target 62.48 USD (+23.2%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Net interest income depends on the interest rate level, the deposit base and loan demand from retail and corporate customers.
- Fees from asset management, payments and cards support revenue and depend on client assets and consumer activity.
- Investment banking and trading respond to capital markets activity, issuance and transaction volumes, and market volatility.
Risks
- An economic downturn can increase loan defaults and lead to higher loan loss provisions in retail and corporate banking.
- Interest rate changes can weigh on interest margins and on the value of the fixed-income securities portfolios that the bank holds in large amounts.
- Strict regulation, capital requirements, and legal and compliance risks can limit earnings power and room for shareholder distributions.
What to look for with Bank of America
Return on equity relative to tangible book value per share shows how efficiently the bank deploys its capital and how valuation and net asset base relate to each other.