On May 29, 2013, we reiterated our long-term recommendation on
Bank of America Corporation
) at Neutral. This is based on BofA's first-quarter restated
earnings, which significantly outpaced on a year-over-year basis,
but were below the Zacks Consensus Estimate.
BANK OF AMER CP (BAC): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
MBIA INC (MBI): Get Free Report
STATE ST CORP (STT): Free Stock Analysis
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BofA's first-quarter restated earnings of 10 cents per share were
ahead of the prior-year quarter earnings of 3 cents, but lagged
the Zacks Consensus Estimate of 23 cents. Results on a
year-over-year basis benefited from top-line growth, a
significant slowdown in the provision for credit losses and a
fall in non-interest expenses. However, lower mortgage banking
income and reduced net gains on sales of debt securities eroded
the sheen of its bottom line.
Further, in May 2013, BofA resolved a 5-year-old legal dispute
) related to guarantees on commercial mortgage-backed securities
(CMBS). Under the terms of the agreement, the company will pay
nearly $1.6 billion in cash and return $137 million worth of MBIA
5.70% senior notes maturing in 2034.
The Zacks Consensus Estimate for 2013 fell 9.9% to 91 cents per
share over the last 60 days. Additionally, for 2014, the Zacks
Consensus Estimate dropped by a penny to $1.32 per share, in the
same time-frame. Hence, BofA now has a Zacks Rank #3 (Hold).
BofA remains focused on maintaining steady capital levels. Hence,
in Mar 2013, after the Federal Reserve's approval, the company
announced a $5 billion share repurchase program. Further, BofA
has been striving to realign its balance sheet in conformity to
the regulatory changes post the meltdown, in order to remain
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.
Other Major Banks Worth Considering
Some better performing banks include
JPMorgan Chase & Co.
State Street Corporation
), both of which carry a Zacks Rank #2 (Buy).