After gaining 43% in 2019, what does Bank of America (BAC) do for an encore? The money center bank is set to report fourth quarter fiscal 2019 earnings results before the opening bell Wednesday.
Uncertainties about trade wars and the fear of a global growth slowdown which once impacted BofA's trading revenues have vanished. The bank has capitalized on the strength of the U.S. economy and rising consumer confidence. Bank of America’s focus on consumers and lending, combined with its digital capabilities has lead to earnings beats in twelve straight quarters. And Wednesday’s results is setting up for another beat.
CEO Brian Moynihan told conference attendees on Dec. 11 that the bank forecasts Q4 trading revenue to rise 7% to 8% year over year, while investment-banking revenue is expected to rise 3% to 4% year over year. On Wednesday investors will want to see the extent to which these metrics can continue to rise, specifically with loan and deposit growth. Analysts will also look to gauge how other parts of the business can support top-line growth and profits.
For the three months that ended December, analysts expect the Bank of America to earn 68 cents per share on revenue of $22.38 billion. This compares to the year-ago quarter when earning were 70 cents per share on revenue of $22.89 billion. For the full year, ending in December, earnings are projected to rise 3.4% year over year to $2.71 per share, while full-year revenue of $91.61 billion would decline 0.3% year over year.
In the third quarter, Bank of America delivered a beat on both the top and bottom lines as three of the bank’s four main segments reported revenue growth. Adjusted EPS of 75 cents per share beat consensus estimates of 68 cents, while Q3 revenue of $22.8 billion surpassed estimated by about $70 million, driven by its global banking business, which posts an 8% increase to $5.2 billion on higher investment banking fees.
The bank enjoyed a 5% rise in Consumer banking profits which reached $3.3 billion. Its consumer segment made up 42% of Q3 revenue. Loans rose 7% to $304 billion, while deposits climbed 3% to $709 billion. The bank — which has worked diligently to cut expenses — extended its streak of quarters during which it has improved operating leverage by reducing the number of branches and consolidating technology like data centers.
On Wednesday investors will want to see if these positive metrics can continue to rise, specifically with loan and deposit growth. The low interest rate environment could last through much of the year and analyst will listening intently for any commentary on how the management plans to still grow the top ad bottom lines. All told, you would be hard-pressed to find a better-managed bank. And while the stock is no longer in the bargain bin, Bank of America will continue to outperform.
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