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BofA Sees Lower Costs, Concerned by Strained Revenues

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On Nov 20, 2015, we issued an updated research report on Bank of America CorporationBAC . The success of BofA's expense-saving initiatives as well as balance sheet restructuring efforts continues to support its financials. However, pressure on revenues is anticipated to persistently hamper the company's bottom-line growth.

BofA's expense-saving plan - Project New BAC - has been effectively aiding its bottom line for quite some time now. The company had launched the initiative to improve its overall efficiency and save as much as $8.0 billion in operating expenses annually. While the target was achieved in 2014, the downtrend in expenses continued in the first nine months of 2015 as well.

Moreover, BofA continues to consolidate branches in markets where growth potential does not meet its criteria, while expanding in high-growth markets. Over the past one year, Bank of America has closed/sold more than 200 branches.

However, a still low rate environment and lower loan levels have been persistently straining BofA's net interest margin ("NIM"). Also, stressed portfolio run-off and lower hedge income, led by the financial reform law, will likely be drag its NIM for the next few quarters.

Based on decent third-quarter 2015 performance, analysts have maintained their estimates for 2015; while concerns over strained top line triggered a decline in 2016 estimates. Over the past 60 days, the Zacks Consensus Estimate for 2015 stood at $1.43 per share; while for 2016, the same fell 3.7% to $1.56 per share.

Currently, BofA carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked finance stocks include Ally Financial Inc. ALLY , Central Pacific Financial Corp. CPF and Arlington Asset Investment Corp. AI . All three stocks hold a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BANK OF AMER CP (BAC): Free Stock Analysis Report

CENTRAL PAC FIN (CPF): Free Stock Analysis Report

ARLINGTON ASSET (AI): Free Stock Analysis Report

ALLY FINANCIAL (ALLY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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