Banking & Finance

Analyzing Bank of America (BAC)

By Yaser Anwar, CSC of Equity Investment Ideas

  • BAC is doing quite well lately evident by the fact that BAC has had the greatest improvement on a sequential basis of around eight points. The 3rd Q demonstrated the progress that it has made in executing cost saves from the MBNA acquisition. As of September 30, cost savings were $795 million, well above the full year goal of $675 million, and imply a full-year savings of well over $1 billion (the acquisition is accretive in 07).
  • Investors should anticipate the non-mortgage consumer, commercial lending and market sensitive fee-based businesses to drive revenue growth in 2007 as they did in 06.
  • I believe that continued solid credit quality and efficiency improvements are likely to make a positive contribution to the company’s earnings growth. The acquisition of MBNA was an opportunity for BAC to add higher returning loans to its portfolio and help mitigate the effects of a challenging interest rate environment.
  • BAC management needs to show that they can improve the value in having a national franchise and can sustain some meaningful organic revenue growth. The downside to BAC is limited by the ongoing share buybacks and the attractive 4+% dividend yield alongside the low multiple it is trading at.
  • Also- recently BAC mentioned they will be having a new CFO. Joe Price’s circle of competence lies in in finance, auditing and, in particular, risk management make him a solid choice for the position.

Update 1:35 AM– My investment club owns BAC (forgot to include earlier!)

Sponsored: Want to Retire Early? Here’s a Great First Step

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.