Bank of America (BAC) is an American multinational banking and financial services corporation which provides a diversified range of banking and non-banking financial services and products through five business segments, namely Consumer and Business Banking, Consumer Real Estate Services, Global Wealth and Investment Management, Global Banking and Global Markets. It offers a diversified range of credit, banking and investment products and services to consumers and businesses. The bank's 2008 acquisition of Merrill Lynch made BAC the world's largest wealth management corporation and a major player in the investment banking market.
Recently Wells Fargo & Company (WFC, Financial), the US’s largest mortgage lender, and HSBC Holdings Plc (HSBC, Financial) have been banned from taking on new mortgage servicing activities after a US regulator found the banks failed to improve servicing and foreclosure practices but Bank of America, Citigroup (C, Financial) and The PNC Financial Services Group, Inc. (PNC, Financial) were found to have complied with the OCC recommendations and will not face any limitations on their mortgage servicing businesses.
At the end of the first quarter, BAC held a staggering $1.19 trillion in domestic deposits and with other 2 banks JPMorgan Chase % Co. (JPM) and Wells Fargo together, had control of a third of the country's total deposits.
This is important because banks generate income by borrowing money at low short-term interest rates and then investing the proceeds in higher-yielding assets such as loans and government securities.
For its first quarter, total client balances increased 5% from the year-ago quarter driven by higher market levels and net inflows and the first-quarter 2015 long-term assets under management (AUM) flows of $14.7 billion were the 23rd consecutive quarter of positive flows. Tangible book value per share increased 7% from Q1-14 and book value per share increased 4%.
In terms of segment performance, Bank of America’s Consumer Banking unit generates the highest revenue for the bank, almost 36%, followed closely by Global Markets and Global Wealth and Investment Management. The bank’s Consumer Banking unit is expected to improve performance this quarter, offsetting weaknesses in the other units. This is primarily driven by core deposit growth.
BAC is expected to report earnings per share (EPS) of $0.36 in the second quarter, higher than the EPS figure of $0.30 attained in the first quarter, and in line with the Street’s estimate. Observing EPS trends for the past quarters shows that BAC has mostly been posting an earnings surprise, and exceeding consensus estimates.
Deutsche Bank recently released a report in which it details its estimates for expected earnings and the top picks named were BAC, JPM, M&T Bank Corporation (MTB) and SunTrust Banks, Inc. (STI).
Deutsche bank suggests that the Bank of America has more cost savings coming and already has a good leverage in the fixed income, currency and commodities markets and the bank is expected to have an attractive valuation because now the majority of its litigation and legal issues are settled.
Bank of America's latest 10-Q shows that a parallel increase in short- and long-term rates of only 1 percentage point will boost the bank's annual net interest income by $4.6 billion. That's a lot of money when you consider that BAC earned only $3.3 billion in total throughout the first three months of the year.
The main institutional holders of Bank of America are Vanguard Group Inc. (5.32% of outstanding shares), State Street Corporation (4.32%) and FMR LLC (3.41%)