Bank of America's Growth Boosted by Strong Fees and Operating Efficiency: Goldman Sachs Analyst

Goldman Sachs analyst Richard Ramsden reiterated a Buy rating on Bank Of America Corp BAC with a price target of $45.

Bank of America reports fiscal 2024 second-quarter net income of $6.9 billion, beating estimates. Revenue increases 0.8% year over year to $25.5 billion, surpassing expectations.

Bank of America anticipates net interest income of ~$14.50 billion in the fourth quarter.

Ramsden noted the results as slightly better than expectations, given a core Pre-provision Net Revenue (PPNR) of $9.2 billion beat the Street and Goldman Sachs estimate by 2% and 5% on better fees, slightly lower Net Interest Income (NII), and better operating efficiency, with the core Return on Average Tangible Common Shareholders’ Equity (ROTCE) of 13.5%, 25bps above/65bps above the Street and Goldman Sachs estimate.

Ramsden expects the focus to be on the NII outlook from here, after the company guided to $14.5 billion of fiscal fourth-quarter NII (vs. the Street at $14.4 billion), driven by fixed asset repricing, and the Bloomberg Short Term Bank Yield Index (BSBY)  reference rate cessation benefit, although the analyst noted that this guidance bakes in 3 Fed Funds rate cuts from September-December.

Ramsden sought further clarity on the 2025 NII outlook, the efficiency outlook for 2024, the trajectory of capital markets revenue in 2024, updates to capital returns, and the pace and magnitude of credit normalization.

Ramsden expects the market to look past the weaker NII this quarter and consider the better fiscal fourth-quarter exit run rate.

The analyst projected fiscal 2024 revenue and EPS of $101.91 billion and $3.13.

Price Action: BAC shares are trading higher by 5.16% at $44.05 at the last check Tuesday.

Photo via Shutterstock