In a pretty short period of time, major banks like Bank of America (BAC)
have seen their operating environments shift from more or less stable
(with some questions about economic growth and credit quality, sure) to
whitewater rapids. Adding to that is the fact that there really isn’t a
roadmap for what happens next – bank management teams have experience
with recessions, credit bubbles, and so on, but epidemic-driven
challenges are a new twist.
I believe the high-quality majors, including Bank of America, JPMorgan (JPM), and PNC (PNC),
will get through this okay, but with so much uncertainty about when
businesses (and the economy in general) will get back to normal and what
the credit losses will look like in the meantime, it’s hard to have
much confidence in modeling. I do believe that Bank of America is
undervalued here, though, and worth consideration even though the next
year (or two) will be challenging.
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