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Should you buy Bank of America stock after ‘stellar’ Q3 results?

By:
on Oct 17, 2022
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  • Bank of America reports its financial results for the third quarter.
  • UBS analyst shares her outlook on the Bank of America stock.
  • Bank of America shares are up more than 5.0% this morning.

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Bank of America Corp (NYSE: BAC), on Monday, reported market-beating results for its fiscal third quarter. Shares are up more than 5.0% this morning.

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Is Bank of America stock a ‘buy’ now?

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Highlight of the earnings report was the net interest income that climbed 24% this quarter. Discussing the results on CNBC’s “Squawk on the Street”, Erika Najarian (UBS) said:

That was an A+ quarter. Bank of America increased its NII to $13.8 billion, had good loan growth, and outperformed sales and trading expectations while growing capital. That’s very hard to hit given that banks earn revenue off of their balance sheet.

Experts had forecast $13.53 billion in net interest income. On the flip side, investment banking tanked 46% in Q3. Still, Najarian reiterated:

Their ability to grow capital, reduce risk by mitigating the risk-weighted assets and still hit or outperform those revenue banks, I think that’s really a stellar performance.

The U.S. Federal Reserve has signalled a terminal rate of 4.6% in 2023, which, she added, suggests about three more quarters of benefit to net interest income.

Key takeaways from Bank of America Q3 results

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  • Net income printed at $6.58 billion versus the year-ago $7.26 billion
  • Per-share earnings slid a little from 85 cents to 81 cents
  • Revenue jumped 8.0% on a year-over-year basis to $24.5 billion
  • Consensus was 78 cents a share of EPS on $23.54 billion in revenue
  • Average loan and lease balances went up 12% to top $1.0 trillion

Other notable figures in the earnings report include $378 million of net reserve build and a 12% annualised increase in net charge-offs.

Analyst picks Bank of America stock over JPMorgan

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Erica Najarian sees the Bank of America as well-positioned for a recession. She actually prefers this stock over JPMorgan.

I think the Bank of America will take the mantle from JPMorgan as potentially the sector leader since BofA has to hold less capital than JPMorgan and, therefore, it’s easier for them to earn a higher ROE on a comparable basis.

Her $44 price target on the Bank of America stock represents a 35% upside from here.

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