Is Bank of America's Slow Start in 2025 an Opportunity for Investors?

Core Insights - Bank of America (BAC) shares have increased by 2.2% in 2025, underperforming compared to Citigroup's 29.9% and JPMorgan's 19.7% gains, indicating relative weakness in the stock performance [1][9]. Financial Performance - In the first half of 2025, Bank of America reported a 5% year-over-year growth in net interest income (NII), driven by strong loan demand, sustained high interest rates, and a solid deposit base. The bank anticipates NII growth of 6-7% for the year [5][4]. - The average global liquidity sources for Bank of America stood at $938 billion as of June 30, 2025, reflecting a robust liquidity profile [11]. Strategic Initiatives - Bank of America is pursuing aggressive branch expansion, planning to open over 150 new financial centers by 2027, with 40 expected to open this year and 70 more in 2026. This strategy aims to enhance customer relationships and penetrate new markets [6][9]. - The bank is also investing heavily in technology initiatives to attract and retain customers, which is expected to boost cross-selling opportunities [10]. Shareholder Returns - The company has authorized a $40 billion share buyback program effective from August 1, 2025, and has raised its dividend by 8% to $0.28 per share, continuing to reward shareholders [12][14]. Investment Banking Performance - Bank of America's investment banking (IB) fees saw a significant decline of 45.7% in 2022 and 2.4% in 2023, but rebounded with a 31.4% increase in 2024. However, in the first half of 2025, IB fees declined by 6% year-over-year due to market headwinds [15][16]. Asset Quality Concerns - The asset quality of Bank of America has been deteriorating, with provisions increasing by 115.4% in 2022, 72.8% in 2023, and 32.5% in 2024. Net charge-offs also rose by 74.9% in 2023 and 58.8% in 2024, indicating ongoing challenges in maintaining asset quality [18][19]. Valuation Metrics - Bank of America is currently trading at a price-to-tangible book (P/TB) ratio of 1.66X, which is below the industry average of 2.87X, suggesting that the stock is undervalued compared to its peers [22][24].