BAC's Liquidity Cushion: A Green Light for Solid Capital Return Plans?

Core Insights - Bank of America (BAC) has a strong liquidity position with cash and cash equivalents of $266 billion and total debt of $760.8 billion as of June 30, 2025, with only $47.9 billion in near-term borrowings [1][12] - The company maintains investment-grade long-term credit ratings from major agencies, which supports its resilient earnings and capital returns [2] - Following the 2025 stress test, BAC's stress capital buffer (SCB) was reduced to 2.5%, enhancing its flexibility for capital returns [3][5] - BAC initiated a $40 billion share repurchase plan and increased its quarterly dividend by 8% to 28 cents per share, reflecting a commitment to returning capital to shareholders [4][12] - The company is well-positioned to sustain higher dividends and aggressive share repurchases due to its robust liquidity and capital base [5] Liquidity Comparison with Peers - JPMorgan (JPM) has a total debt of $485.1 billion and cash and deposits of $420.3 billion as of June 30, 2025, and has also authorized a $50 billion share repurchase program [6][7] - Citigroup has cash and investments totaling $474.4 billion against total debt of $373.3 billion, and it raised its dividend by 7% to 60 cents per share post-stress test [8][9] Price Performance and Valuation - BAC shares have increased by 6.8% year-to-date, while JPMorgan and Citigroup have seen gains of 21.1% and 33.1%, respectively [10] - BAC trades at a price-to-tangible book (P/TB) ratio of 1.73X, which is below the industry average [13] - Earnings estimates for BAC indicate year-over-year growth of 12.2% for 2025 and 16.2% for 2026, with recent estimates showing slight upward adjustments for 2025 [15]