On Sep 3, 2013, we reaffirmed our long-term recommendation on
Bank of America Corporation
) at Neutral. This was based on BofA's strong second-quarter
earnings, which outpaced the Zacks Consensus Estimate. However,
continued pressure on the top line and a low interest rate
environment remain causes of concern.
BofA's second-quarter earnings of 32 cents per share beat the
Zacks Consensus Estimate by 28%. Results benefited from a fall in
operating expenses and a slowdown in provision for credit losses.
Though the top line improved year over year, it was not a major
Further, BofA remains on track to save approximately $1.5 billion
in cost per quarter as a result of the successful implementation
of its efficiency initiative - Project New BAC. Moreover, the
company continues to align its banking center network according
to the customers' needs by consolidating its branch network.
The Zacks Consensus Estimate for 2013 increased by a penny to 91
cents per share over the last 60 days. Additionally, for 2014,
the Zacks Consensus Estimate advanced 2.3% to $1.35 per share in
the same time period. Hence, BofA now has a Zacks Rank #3 (Hold).
However, BofA's increased cost structure remains a cause of
concern. Moreover, we are concerned about the company's top-line
growth, which continues to be impacted by the low rate
environment and sluggish economic recovery. Also, the financial
reform law is expected to have a long-standing effect on BofA's
profitability by resulting in higher costs, fee reductions and
Other Major Banks Worth Considering
Some better performing banks include
Wells Fargo & Company
M&T Bank Corporation
). While BankUnited carries a Zacks Rank #1 (Strong Buy), Wells
Fargo and M&T Bank both have a Zacks Rank #2 (Buy).
BANK OF AMER CP (BAC): Free Stock Analysis
BANKUNITED INC (BKU): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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