Is The Market Missing Bank Of America's Strong Earnings Growth?

Bank of America Corp. (NYSE:BAC) kicked off earnings season with a stronger-than-expected second quarter on Wednesday, reporting net income of $7.1 billion and earnings per share of 89 cents, surpassing analyst expectations.

While revenue of $26.5 billion slightly missed consensus estimates, the bank saw growth driven by higher net interest income, robust sales and trading activity, and increased asset management fees, despite lower investment banking fees.

Following the results, the banking giant garnered positive commentary from Wall Street analysts, with several affirming their outlook on the stock.

Also Read: Bank Of America’s Q2 Results’ Better Than Feared’, Says Analyst

Goldman Sachs analyst Richard Ramsden and Keefe, Bruyette & Woods analyst Christopher McGratty both maintained positive ratings on Bank of America (BAC) on Thursday. Ramsden reiterated a Buy rating with a price forecast of $56, while McGratty maintained an Outperform rating with a slightly higher price target of $57.

Goldman Sachs’ Perspective

Ramsden raised his earnings estimates for 2025E, 2026E, and 2027E EPS by 1%, reflecting relatively stable macro conditions and positive product cycles. For second-quarter 2025, BAC reported EPS of 89 cents, which is in line with consensus, and core EPS of 89 cents, slightly below Ramsden’s estimate of 91 cents. He noted that NII growth guidance for 2025 is projected at 6-7% Y/Y, outperforming other large banks, which are seeing an average of +4% growth.

Ramsden also highlighted strong loan growth at 7% Y/Y, driven by increased demand due to tariff uncertainty and ongoing franchise expansion. This will likely help BAC gain market share in 2025E/2026E, with Ramsden expecting robust core operating leverage of 40 bps in 2025E and 150 bps in 2026E.

Regarding expenses, BAC’s 2025E and 2026E expenses were slightly higher than initially anticipated. Still, Ramsden believes the substantial fee revenue will continue to offset these increases, with second-half 2025 expense growth expected to be flat compared to the second quarter. Ramsden also noted healthy core fees of $11.8 billion for the second quarter, driven by strong performance in equities trading (+2%) and fixed income (+10%).

Regarding capital returns, BAC returned $5.3 billion to shareholders in the second quarter of 2025, with a CET1 ratio of 11.5%. Ramsden highlighted that the capital cushion at BAC, which decreased by 30 bps Q/Q, gives the company significant flexibility for buybacks and future balance sheet growth.

He raised his 2025E, 2026E, and 2027E capital markets revenue by 1%. Looking ahead, Ramsden expects BAC’s 2025 EPS to be $4.42, 2026E EPS to be $5.60, and 2027E EPS to reach $6.75. Ramsden also remains cautious on BAC’s valuation, as it currently trades at ~1.65x TBV, 13pp underperforming peers year-to-date, indicating substantial upside potential from this point. “We continue to believe that the market undervalues its earnings growth profile, and thus see significant rerating potential from here.”

Keefe, Bruyette & Woods’ Key Takeaways

BAC reported core PPNR of—$0.01 per share, slightly below KBW’s estimate. Better credit and tax results offset this. Importantly, BAC maintained its fourth-quarter 2025 NII guidance of $15.5–$15.7 billion (KBW’s estimate was $15.67 billion).

McGratty listed his key takeaways. Core PPNR was -$0.01 per share vs. KBW’s estimate, with NII down by $0.01, fees down by $0.01, and expenses up by $0.01.

Investment Banking fees of $1.5 billion (vs. KBW’s estimate of $1.3 billion) were down 7% year over year (Y/Y), but better than the mid-quarter guidance of a 20-25% decline, with DCM showing the biggest upside in second-quarter 2025.

Trading revenues reached $5.4 billion, up 15% Y/Y (vs. KBW’s estimate of $5.0 billion), driven by strong FICC and Equities performance.

Provisions totaled $1.6 billion, or $0.02 per share above KBW’s estimate, with NCOs at 55 bps, up 1 bp Q/Q (quarter over quarter).

Average loan and deposit growth were 3% and 1% Q/Q, respectively (not annualized), while NIM was down 5 bps Q/Q due to lower loan yields compared to KBW’s estimate. Buybacks totaled $5.3 billion, surpassing KBW’s estimate of $4.6 billion.

Price Action: BAC stock is trading higher by 1.36% to $46.66 at last check on Thursday.

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