Bank of America reported better-than-expected earnings in the fourth quarter. However, shares of the banking giant slipped 1% as 4Q revenue missed the Street’s estimates. The bank also authorized a share buyback plan worth $2.9 billion.
Bank of America’s (BAC) 4Q earnings of $0.59 per share exceeded the Street’s estimates of $0.55 per share but declined 20.3% year-over-year. Its 4Q revenue of $20.1 billion fell 10.1% from the year-ago quarter and lagged analysts’ expectations of $20.6 billion.
Net interest income (NII) fell 15.5% to $10.3 billion, reflecting lower interest rates. Non-interest income declined 4% to $9.8 billion year-over-year, while non-interest expense increased 5% to $13.9 billion during the same period.
In 4Q, the provision for credit losses decreased to $53 million from $941 million in the year-ago quarter. Bank of America’s loan and lease balances fell 2% to $913 billion year-over-year, while deposits increased 23% to $1.7 trillion.
On Jan. 11, Citigroup analyst Keith Horowitz upgraded the stock to Buy from Hold and lifted the stock’s price target to $37 (12.1% upside potential) from $31. In a note to investors, Horowitz said that the company “is also more levered to consumer, which we think will perform better this credit cycle given the stimulus programs.”
The analyst expects the bank to resume returning capital to shareholders in the next quarter.
Overall, the rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus shows 9 Buys, 3 Holds and 1 Sell. The average price target of $35.65 implies upside potential of about 9% to current levels. Shares have declined over 4% over the past year.
From TipRanks’ Smart Score system, the stock scores a “Perfect 10”, indicating that the stock has a strong chance of beating market expectations.