Bank of America shares gain the most in 79 months on Wednesday, fourth-quarter earnings top estimates as stronger lending, higher interest income support

January 17, 2019 8:21 am

Bank of America Corp’s (BAC) fourth-quarter earnings, reported on Wednesday, surged past Wall Street estimates, as higher US interest rates in 2018 and a healthy jobs market facilitated a surge in interest income as well as loan growth.

Bank of America shares closed higher for a fourth consecutive trading session in New York on Wednesday. It has also been the sharpest daily surge since June 6th 2012. The stock went up 7.16% ($1.90) to $28.45, after touching an intraday high at $28.71, or a price level not seen since December 3rd ($29.04).

Shares of Bank of America Corporation have risen 15.46% so far in 2019 compared with a 4.36% gain for the benchmark index, S&P 500 (SPX).

In 2018, Bank of America’s stock went down 16.53%, thus, it underperformed the S&P 500, which registered a 6.24% loss.

The lender’s revenue, net of interest expense, was reported to have surged 11% to $22.7 billion during the quarter ended on December 31st from a year earlier.

Loans to individuals grew 4% year-on-year during the past quarter, while loans to corporate clients were up 2%.

On the other hand, the bank’s adjusted sales and trading revenue shrank 6% year-on-year during the fourth quarter as bond trading revenue dropped 15%, while equity trading revenue grew 11%.

Bank of America said that revenue from its investment banking business had decreased 5% year-on-year during the latest quarter as a result of a drop in debt underwriting and advisory fees.

At the same time, the lender’s non-interest expenditures decreased 1% year-on-year to $13.13 billion.

Meanwhile, net income attributable to shareholders was reported to have risen to $7.04 billion (or $0.70 per share) during the quarter ended on December 31st from $2.08 billion (or $0.20 per share) in the same period a year ago. In comparison, analysts on average had expected earnings of $0.63 per share.

The bank also said that its total net interest income had surged 7.3% year-on-year to $12.3 billion during the fourth quarter.

According to CNN Money, the 28 analysts, offering 12-month forecasts regarding Bank of America’s stock price, have a median target of $33.00, with a high estimate of $40.00 and a low estimate of $28.00. The median estimate represents a 15.99% upside compared to the closing price of $28.45 on January 16th.

The same media also reported that 15 out of 30 surveyed investment analysts had rated Bank of America’s stock as “Buy”, while 9 – as “Hold”.

Weekly Pivot Levels

By using the traditional method of calculation, the weekly levels of importance for Bank of America Corporation (BAC) are presented as follows:

Central Pivot Point – $25.72
R1 – $26.35
R2 – $26.67
R3 – $27.30
R4 – $27.93

S1 – $25.40
S2 – $24.77
S3 – $24.45
S4 – $24.13

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