Fed Set to Pivot: Is Now the Right Time to Bet on BAC Stock?

Core Viewpoint - Bank of America (BAC) is positioned as a rate-sensitive bank, with net interest income (NII) growth expected to slow down due to anticipated Fed rate cuts, despite a projected 6-7% increase in NII for 2025 driven by loan demand and easing capital rules [1][8]. NII Growth and Economic Factors - The company benefited from a 100 basis point rate cut last year, leading to a sequential rise in NII since Q2 2024, supported by fixed-rate asset repricing and higher loan and deposit balances [2]. - Easing regulatory capital requirements and a potential increase in lending activity as rates decline are expected to support NII expansion [5]. Competitive Landscape - Peers like JPMorgan and Citigroup are also showing resilience in NII growth, with Citigroup projecting a 4% increase for 2025 and JPMorgan expecting a 3% rise [6]. Strategic Initiatives - Bank of America plans to open over 150 new financial centers by 2027, with 40 expected this year, as part of a strategy to enhance customer relationships and tap into new markets [7][10]. - The bank is investing heavily in digital initiatives to attract and retain customers, which is expected to boost cross-selling opportunities [11]. Financial Health and Shareholder Returns - As of June 30, 2025, Bank of America reported average global liquidity sources of $938 billion, maintaining a solid liquidity profile [12]. - The company has approved a $40 billion share buyback and raised its dividend by 8% to 28 cents per share, reflecting a commitment to rewarding shareholders [8][13][15]. Investment Banking Performance - After a challenging period, Bank of America's investment banking (IB) business is showing signs of recovery, with deal-making activities regaining momentum [16][17]. Asset Quality Concerns - Bank of America has experienced a decline in asset quality, with provisions increasing significantly over the past few years due to a worsening macroeconomic outlook [18][19]. Valuation and Earnings Estimates - Bank of America's stock is trading at a price-to-tangible book (P/TB) ratio of 1.88X, which is below the industry average of 2.93X, indicating it is relatively inexpensive [23][25]. - The consensus estimate for 2025 earnings is $3.68, with projected growth rates of 12.2% and 16.2% for 2025 and 2026, respectively [26].