Writing about Bank of America (BAC) back in August, my feelings on this giant bank were mixed – while I liked the long-term growth outlook and the bank’s leverage to higher rates, I didn’t see the near-term setup or valuation as compelling enough to suggest buying. Since then, the shares have modestly lagged the large bank peer group (up around 6% versus 9%), even though there have been clear signs of acceleration in the business.
Obviously Russia’s invasion of Ukraine threw more uncertainty into the global economic outlook, but the “on the ground” operating conditions for Bank of America in the U.S. continue to improve, and not only is Bank of America the most asset-sensitive of the large banks, it has multiple drivers of growth including an expansive commercial lending operation and strong retail banking and wealth management operations.
With a modestly upgraded growth outlook, I think Bank of America looks quite interesting here, with near-term undervaluation in the double-digits and longer-term total return potential likewise in the low double-digits.
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