Should I Buy Bank Of America Stock
Bank of America (NYSE:BAC) stock crashed 6.2% on Thursday, on news that a small regional bank was at risk of going bust, and large banks were having to raise CD interest rates. In a Thursday article, Reuters reported that Silicon Valley Bank (SIVB) was forced to issue shares, which caused the stock to crash 56% in a single day. Around the same time, Bloomberg reported that U.S. banks were having to jack up CD rates in order to meet capital requirements.
should i buy bank of america stock
Bank of America (BAC 1.96%) was among the top performing bank stocks in the second half of 2022, returning 6.4% over the last two quarters of the year. Overall, the nation's second-largest bank was down about 26% in 2022.
As a new year begins, investors may be wondering if the bank stock's momentum from the second half of the year will continue this year amid much economic and market uncertainty. Here are several reasons Bank of America remains a buy in 2023.
The first reason is that loan activity should remain robust for the bank, even in an economy that is forecast to slow, and possibly even go into a recession. The bank reported fourth-quarter and year-end earnings on last Friday, and revenue and earnings topped analysts' forecasts. The company is anticipating loan growth in 2023, which along with rising interest rates, should lead to a boost in net interest income in 2023.
These factors all contributed to the bank's solid performance in the second half of the year. In 2023, conditions are largely the same, and they remain favorable for Bank of America. It should be able to navigate the rough waters of 2023 much as it did in 2022, with rising net interest income offsetting any losses elsewhere.
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. You should review any planned financial transactions that may have tax or legal implications with your personal tax or legal advisor.Securities products are provided by Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S", or "Merrill"), a registered broker-dealer, registered investment adviser, Member SIPC layer, and a wholly-owned subsidiary of Bank of America Corporation. MLPF&S makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation.Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation. Trust and fiduciary services are provided by Bank of America, N.A. and U.S. Trust Company of Delaware. Both are indirect subsidiaries of Bank of America Corporation.Insurance Products are offered through Merrill Lynch Life Agency Inc. (MLLA) and/or Banc of America Insurance Services, Inc., both of which are licensed insurance agencies and wholly-owned subsidiaries of Bank of America Corporation.Banking, credit card, automobile loans, mortgage and home equity products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.
The other metric to watch is loan activity. If the economy does fall into recession, will average loans contract or continue to grow? Rising interest rates should continue to boost net interest income, and as a bank that gets 40% of its revenue from consumer banking, it should help revenue, even if loan growth slows.
Over the past month, shares of this nation's second-largest bank have returned -14.5%, compared to the Zacks S&P 500 composite's -3.8% change. During this period, the Zacks Banks - Major Regional industry, which Bank of America falls in, has lost 10.6%. The key question now is: What could be the stock's future direction?
For example, a regional bank would be classified in the Finance Sector. Within the Finance Sector, it would fall into the M Industry of Banks & Thrifts. And within the M Industry, it might further be delineated into the X Industry group called Banks Northeast. This allows the investor to be as broad or as specific as they want to be when selecting stocks.
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After a rough year in 2022, bank stocks are now navigating a fresh minefield in 2023. Rising interest rates have triggered a sharp decline in long-term bond prices, resulting in massive losses for banks holding them on their balance sheets. As a result, U.S. regional banks like Silicon Valley Bank parent SVB Financial Group (ticker: SIVB) and Signature Bank (SNBY) recently became the two largest U.S. bank failures since the 2008 financial crisis. Cryptocurrency lender Silvergate Capital Corp. (SI) has also announced it is liquidating its assets and shutting down after 2022's "crypto winter" prompted an exodus of customer funds. Investors are understandably concerned over potential for contagion within the banking industry, but the sharp sell-off in bank stocks could also prove to be an excellent long-term buying opportunity in high-quality banks. Here are eight of the best bank stocks to buy in 2023, according to Bank of America analysts.
Bank of America (NYSE: BAC) recently announced its Q2 earnings that fell short of some estimates while other metrics stayed strong. The company's Q2 GAAP EPS stood at $0.73, missing estimates by $0.02. At the same time, its revenue grew 5.7% YoY to $22.7B, missing estimates by $90M. However, some of the company's results have been seen as bullish signals, as the stock rallied 1.2% after it posted earnings. Notably, BAC's net interest income grew 22% to $12.4B, partially driven by higher interest rates. While on the other hand, non-interest income shrank by $989M due to a deterioration in capital markets and lower investment banking fees, among other factors. Another positive for the company was that its average deposits were up 7% by $123B for a $2.0T total. Average loans and lease balances were also strong as they increased by $107B or 12% to $1.0T.Bank of America also strengthened its balance sheet compared to previous years. It noted that it is in a solid position to weather an economic downturn, such as in the case of a recession. Its recently released investor presentation states that it's more balanced and has less inherent risk. Some notable examples of how the company achieved this include a reduced concentration of consumer loans, less exposure to unsecured consumer credit and home equity loans, and less concentration in construction loans. It also made a notable pivot towards offering more Global Wealth Investment Management (GWIM) loans, which is credit provided to wealthy and high-net-worth individuals. Its GWIM loans rose from $100B in 4Q'09 to $222B in 2Q'22, while its home equity loans shrank from $154B to $27B over the same period. Other risky lines of credit were also reduced, such as consumer credit card lending, which shrank from $161B to $84B. Overall, the bank stated that it has a significantly lower expected credit loss if a severe recession does come to fruition, with a nine-quarter stress-tested loss of $53B, or 5.2%, compared with $104B or 10% in 4Q'09.
The $380 billion bank highlighted stocks it thinks will outperform in all the S&P 500 sectors. Five of BofA's 11 picks for 2022, including energy Exxon Mobil (XOM), financial firm Wells Fargo (WFC) and health care CVS Health (CVS), are already beating both the S&P 500 and their sectors this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Exxon Mobil carries a decent 81 IBD Composite Rating. 041b061a72