Bank of America Corp (NYSE:BAC) posted a decent second quarter report last month. The company earned $0.46 per share on $22.8 billion revenue, lower than the forecast of $0.43 EPS and $21.8 billion revenue. The results surprised investors because Bank of America CEO Brian Moynihan had issued a warning ahead on the earnings that the quarter was impacted by lower-than-expected interest rates, a drop in trading revenues and the closure of several assets. Net interest income in the quarter increased by 9% to reach $11 billion, but net interest yield or margin saw a lower growth rate. Bank of America’s Global Wealth and Investment Management (GWIM) posted record results in the quarter, a sign that the bank is expanding worldwide.
The interest rate difference between the second quarter of 2016 and the first quarter of 2017 has resulted in 9.7% gain for Bank of America Corp (NYSE:BAC). Analysts believe that the latest uncertainty around interest rates and growth is due to the lack of implantation of President Trump’s tax reforms. The situation will stablize in the coming months. Bank of America’s loans and currency reserves are also negatively impacted due to a weakening dollar.
Fears regarding Bank of America Corp (NYSE:BAC) increasing credit card net charge-off rates have some merit in them, as they are one of the reasons the stock didn’t gain value even after strong second quarter results. However, it should be noted that the bank has started loosening its credit policies after several years, and the charge off rates are normal when compared to the overall industry. Also, Bank of America has the lowest interest rates when compared to competitors like Citi, Wells Fargo, JPMorgan.
Loans in the second quarter went up to reach $916.7 billion, compared to $903.2 billion in the second quarter of 2016. Deposits in the period came in at $1.263 trillion, compared to $1.216 trillion reported in the same quarter last year.
Bank of America Corp (NYSE:BAC) is focusing to increase its mobile banking users, as it would decrease overhead costs and branches. In the second quarter, the Bank recorded 1 billion digital interactions, and a 21% increase in deposits made through mobile devices. It takes around a thousand physical financial centers to harness the growth Bank of America experienced on its mobile platform.
Bank of America increased its dividend payout to $0.48 per share, after which billionaire investor Warren Buffet acquired a big stake in the company and converted preferred shares to common stock.
Bank of America Corp (NYSE:BAC) is attractively valued. The stock is trading at 95% of its book value. The bank’s shares have gained over 12% since the start of this year. The bank has a PE ratio of 14.79 and a forward PE of 11.02, which depicts an excellent valuation.