Does BAC Stock Deserve a Spot in Your Portfolio Ahead of Q3 Earnings?

Core Viewpoint - Bank of America is expected to report strong third-quarter 2025 results, driven by growth in net interest income and trading activities, despite a subdued investment banking performance [2][10]. Financial Performance - The Zacks Consensus Estimate for revenues is $27.12 billion, indicating a 7% year-over-year growth [2]. - Earnings estimates for the quarter have been revised down by 1.1% to 94 cents, reflecting a 16.1% increase from the previous year [3]. - Bank of America has a history of exceeding earnings estimates, with an average surprise of 6.24% over the last four quarters [5]. Net Interest Income (NII) - NII is projected to grow sequentially to around $15.2 billion, representing a 7.9% year-over-year increase [9]. - The overall lending environment has been strong, particularly in commercial and industrial loans, which is expected to positively impact NII [8]. Investment Banking (IB) Fees - IB fees are anticipated to increase by 10-15% year-over-year, supported by a rebound in global M&A activity and a strong IPO market [12]. - The Zacks Consensus Estimate for IB income is $1.62 billion, reflecting a 4.7% growth from the prior year [13]. Trading Income - Trading revenues are expected to rise in the mid-single digits year-over-year, driven by high client activity and market volatility [15]. - The Zacks Consensus Estimate for total sales and trading revenues is $5.23 billion, indicating a 6% year-over-year increase [15]. Expenses - Non-interest expenses are projected to be around $17.3 billion, suggesting a 4.9% year-over-year increase due to branch expansion and digitization efforts [16]. Asset Quality - The provision for credit losses is estimated at $1.58 billion, with non-performing loans expected to rise by 18.3% year-over-year [18]. Stock Performance and Valuation - Bank of America shares gained 9% in the third quarter, underperforming compared to peers like JPMorgan and Citigroup [21]. - The stock is trading at a price-to-tangible book (P/TB) ratio of 1.80X, which is below the industry average of 2.91X, indicating it is currently undervalued [23]. Strategic Outlook - The company is focusing on aggressive branch expansion and technology investments to enhance customer relationships and drive NII growth [27]. - While the outlook remains positive, potential challenges include the impact of Fed rate cuts and rising operating expenses [28].