Bank Of America Inflection To Continue Into Q4, Analysts Provide Takeaways From Q3 Results

Bank of America Corp BAC reported upbeat earnings on Tuesday for its third quarter.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• Oppenheimer analyst Chris Kotowski reiterated an Outperform rating, while raising the price target from $49 to $50.
• RBC Capital Markets analyst Gerard Cassidy maintained an Outperform rating and price target of $46.
• Goldman Sachs analyst Richard Ramsden reaffirmed a Buy rating and price target of $48.
• KeyBanc Capital Markets analyst Alex Markgraff looked at credit card volume and determined that current spend behavior reflects normalization/stability.

Check out other analyst stock ratings.

Oppenheimer: Bank of America net interest income of $14.1 billion in the third quarter represents 1.8% sequential growth, Kotowski said. The company's core revenues were around $0.4 billion more than expected "on both stronger trading and investment banking results alongisde the stronger NII," he added.

The inflection "has materialized" and is expected to continue into the fourth quarter and beyond, the analyst stated.  "While we don’t expect forward curve volatility to end relatively soon, thus noise in quantifying any NII ramp will likely remain, we’d rather encourage investors to focus on the forest of potential post NII drag," he further wrote.

RBC Capital Markets: Net interest income could trough "for most of our covered banks during the second half of 2024 or first half of 2025, assuming the Federal Reserve cuts the Federal Funds rate possibly two times in 2024 and 2-3 times in 2025," Cassidy said. "Partially offsetting these dynamics will likely be yields on assets (commercial loans) tied to SOFR (Secured Overnight Financing Rate)," he added.

"Management teams maintained a cautiously optimistic outlook for the investment banking industry for the end of 2024 and into 2025, which should support stronger fee revenue growth into 2025," the analyst stated.

The resurgence in M&A activity and initial public offerings could be the "big swing factor for investment banking revenue growth in 2025," he further wrote.

Goldman Sachs: Bank of America reported third-quarter earnings of 81 cents per share, beating consensus of 75 cents per share, Ramsden said. The core earnings came in at 80 cents per share, topping consensus of 76 cents per share, he added.

"We view these results as largely constructive, given the NII beat and 4Q24 NII guidance of $14.3bn or more (up 1% QoQ and in-line with consensus), coupled with a flat 4Q24 expense guidance, and stability in credit quality," the analyst wrote. The bank exhibited cost discipline, as expenses came in-line with Street estimates, despite the core revenue beat of around 1.5%, he further stated.

KeyBanc Capital Markets: Results reported by Bank of America, Citigroup Inc C, JPMorgan Chase & Co JPM and Wells Fargo & Co WFC showed that credit card volume grew 5% year-on-year versus 6% in the second quarter.

Debit card volume grew 4% year-on-year versus 5% in the second quarter.

"Commentary from the four banks acknowledged the deceleration in spend growth, but generally noted consumers remain resilient/on healthy footing and spend behavior reflects normalization/stability," the analyst wrote. Comments from Bank of America noted that the consumer payments growth observed in the third quarter had continued into October, he added.

Price Action: Shares of Bank of America had risen by 1.22% to $42.66 at the time of publication on Wednesday.

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