- Bank of America reported robust results for the first quarter of 2023, beating both top and bottom-line estimates of financial analysts, as a result of its diversified business model and experienced management team, despite the challenges caused by turbulent markets.
- Net revenue of $26.3bn increased 13% due to the benefit of higher interest rates, resulting in net interest income growth of 25% to $2.9bn, aided by trading in fixed interest investments, both of which offset the lower contribution of asset management and investment banking fees.
Non-interest income expenses increase were contained, increasing by 6%, generating operating leverage, which resulted in diluted EPS of $0.94 vs $0.85 in the 4th quarter of 2022, an increase of 10.6%. - Bank of America is the largest retail bank in the US with strong global banking operations, reflecting revenue growth of 19%. Robust deposit growth of 34% to $1.9T reflects a flight to safety following the recent turbulence in global banking markets, with the big US banks benefiting, and the deposit base increasing above that of pre-pandemic levels, which should prove to be positive for future growth in the diversified income of the business operations of the group once macroeconomic conditions stabilize.
- The sound financial metrics of the group, with a return on average assets of 1.07% vs 0.92% in the 4th quarter of 2022, and the return on shareholders’ equity of 12.5% compared to that of the preceding period, reflect the financial strength of the company, as well as sound management strategy.
- A forward PE of around 9x vs an estimated peer average of around 12.5x, and a price-to-book of 1x compared to a peer average estimated of around 1.9x, reflect a significant discount to other players in the US market, making for an attractive entry point at the current level of $30 per share.
- I am an investor in Bank of America as well as JP Morgan Chase, both of which are quality shares with proven management records, having delivered sound results through uncertain economic cycles.By Ron Klipin
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