Bank of America Corp (NYSE:BAC) looks like an excellent long term investment. Almost all of the Bank’s segments – consumer banking to global markets- are going profitable. Investors are still hopeful that the Trump’s administration will announce its much touted deregulation plan, which would give a boost to Bank of America shares. The stock is also poised to grow on the back of more interest rate hikes in the near future. But even if the government stops further rate hikes, Bank of America’s finances won’t be damaged due to its massive exposure to non-interest income areas. Bank of America is also investing in digital strategy to make banking easier for its customers. More than half of the Bank’s ATMs are compatible with smartphone withdrawals. Bank of America’s investment banking and wealth management segments are also expected to gain more traction and growth in the future.
Bank of America Corp (NYSE:BAC) dealt with several legal and regulatory problems over the last five years, and analysts now think that the Bank is set to take off for a smooth future. The company has cut costs and simplified its capital processes. In the second quarter, Bank of America’s Net interest income came in at $11.2 billion, a 9% increase on year over year basis. Net interest yield in the period increased from 2.23% to 2.34%. Bank of America has over $2.6 trillion in assets.
Several major investors are bullish on Bank of America Corp (NYSE:BAC), including legendary billionaire Warren Buffett, who recently exercised his warrant options to buy 700 million shares of Bank of America, becoming the biggest shareholder of the bank with over 6% stake.
Bank of America’s stock is attractively valued. The stock has a price to book value of 0.98, versus the industry average of 1.1. Bank of America’s competitors like JPMorgan and Wells Fargo have price to book rations of 1.41 and 1.42, respectively. BAC has a P/E multiple of 14.82, while the average P/E multiple of major banks is 14.91, according to Damodaran’s calculated multiples.
Bank of America Corp (NYSE:BAC) is up over 5.9% since the start of this year. The company recently announced a 60% increase in its dividend. The stock now has a dividend yield of about 2%. The bank is expected to keep increasing its yield.