Bank Of America Still Has The Credentials To Outperform

I’ve liked Bank of America (NYSE:BAC) (“B of A”) for over a year now, and while regional banks have lived up to my expectation of outperformance versus the money center banks, Bank of America has still done well on a relative basis – and “relative” is an important caveat here, as bank stocks have taken some hits this year despite the prospect of strong earnings growth in 2023. Since my last update, the shares have beaten large bank peers by about 10%, and have outperformed them by about 5% this year.

I continue to like this bank’s blended exposure to both money center banking and Main Street banking trends, including its improving performance in trading and its strong rate sensitivity. While I do think a weaker macro background for 2023 remains a threat, I believe B of A is capable of mid-single-digit long-term core earnings growth and that such growth (as well as near-term earnings and ROTCE) support a fair value in the low-to-mid-$40’s.

 

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Bank Of America Still Has The Credentials To Outperform