Is BAC Stock a Buy? A Deep Dive into Its Medium-Term Roadmap

Core Insights - Bank of America (BAC) has announced a medium-term plan focused on sustainable growth, digital scale, cost discipline, and capital efficiency [1][2] Financial Targets - BAC aims for 5-7% annual growth in net interest income (NII), over 12% earnings growth, and a return on tangible common equity (ROTCE) of 16-18% over the next three to five years, while maintaining a Common Equity Tier 1 ratio of 10.5% [2][10] - The medium-term ROTCE target is higher than Citigroup's 10%-11% and comparable to JPMorgan's 17% [3] Growth Strategy - The bank's growth strategy emphasizes responsible growth, balancing risk with investments in technology, capital, and talent, with over $4 billion allocated annually to technology [4][7] - BAC plans to achieve an efficiency ratio of 55-59% and expects loans and deposits to grow at CAGRs of 5% and 4%, respectively [6][10] Digital and Network Expansion - BAC is expanding its financial centers, having opened 300 new centers since 2019, and plans to open additional centers in six new markets by 2028, contributing $18 billion in incremental deposits [16][17] - The bank's digital initiatives aim to enhance client relationships and productivity through AI and data-driven insights [5][19] Shareholder Returns - BAC has a solid liquidity profile with average global liquidity sources totaling $961 billion as of September 30, 2025, and has raised dividends by 8% to 28 cents per share [20][21] - The bank has announced a $40 billion share repurchase plan, reflecting its commitment to shareholder returns [22] Investment Banking Outlook - BAC's investment banking (IB) business is expected to see mid-single-digit CAGR in fees, with a focus on integrating corporate and IB services and leveraging AI for growth [23][24] Asset Quality Concerns - The asset quality of BAC has been weakening, with significant increases in provisions and net charge-offs in recent years, indicating potential challenges ahead [25][26] Stock Performance and Valuation - BAC shares have gained 21.2% this year but have underperformed compared to peers like Citigroup and JPMorgan [27] - The stock is trading at a price-to-tangible book (P/TB) ratio of 1.94X, below the industry average of 3.19X, suggesting it is undervalued [33][35]