Alexander Kulakov
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Alexander Kulakov in Moscow Financial Club,

Bank of America – further growth is expected

Current price: $17.68

Target price: $18.94

Nowadays Bank of America (BAC) has a great potential for share price growth. In mid-October, an American 2nd biggest bank with Headquarters in Charlotte, N.C., revealed 3Q results, which were even better than expected.

First, bank showed the profit of $4.5 billion or 37 cents per share (analysts were expecting the result of 33 cents per share). Moreover, while all the banks were in the red zone recently, BAC outperformed S&P 500 index with 15% growth compared to 9.3% average.

There are several points “for” the further growth:

  • BAC is enormously big bank, which means it could provide banking services at incredibly low costs;
  • It is stated that mortgage crisis of 2008 has no more affect to bank operations, so investors can expect more stable profits;
  • Possibility of interest rates hike in the end of 2015 should also increase Bank of America profits unless the rates hike will stop growth of US economy. Anyway, it is a small chance of any changes in interest rates in 2015, so it could be a good thing for a bank profits;

Weak points of BAC:

  • Strong sensitivity to interest rates;
  • Decline in revenue of 2.4% to $20.9 billion;
  • Fixed-Income unit revenue fall of 11%

Anyway, a recent performance in last 2 quarters must be an indicator of future growth of this large bank with 4,800 branches and 16,000 ATM I all 50 US states and 35 countries abroad. Also, Industry Forecast Earnings Growth is 91.74 %, which means that such a large bank will make everything possible to earn something on that growth.

Sources: Bloomberg, Yahoo Finance, Nasdaq