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Why 2017 Could Be This Stock's Best Year Yet

Bac Net Charge Offs

For the banking industry and its investors, 2016 was the first year in a long time that could be referred to as a "great" year. The financial crisis is well in the past, and the election of Donald Trump as president of the United States has given the industry a renewed sense of optimism. Bank of America (NYSE: BAC) was one of the best performers in the sector, but there's reason to believe that the good times could still be in the early stages.

Bac Net Charge Offs

Image source: Bank of America.

While the bank's 66% efficiency ratio leaves something to be desired, it's significantly better than last year's 70% figure.

Bank of America's best year yet?

If interest rates rise as expected, Trump's wage and job growth plans start to materialize, and regulations get slashed, it's entirely possible that Bank of America's rally could be just getting started. In my mind, the key for making 2017 Bank of America's best year yet would be all of the above, plus a return to an acceptable level of profitability, which is generally defined as a return on assets (ROA) above 1% and a return on equity (ROE) of above 10%.

The bank has made strong progress in this area, mainly thanks to the efficiency improvements I mentioned. The ROA improved from 0.73% in 2015 to 0.82% in 2016, and the ROE rose from 9.1% to 9.5%. If Bank of America can break through the 1% and 10% barriers and Trump starts to come through on his promises, this could be a very good year for Bank of America.

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Matthew Frankel owns shares of Bank of America. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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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