Wall Street banking giant Bank of America (BAC) reported better-than-expected results for the third quarter of 2021 on robust revenue growth and lower credit losses.
Q3 earnings increased 66.7% to $0.85 per share on a year-over-year basis and topped Street estimates of $0.71 per share. Total revenue rose 12.3% to $22.8 billion and outpaced the consensus estimate of $21.7 billion. (See Bank of America stock charts on TipRanks)
Net interest income increased 10% to $11.1 billion on strong deposit growth and related investment of liquidity. Also, fee income climbed 14% to $11.7 billion, driven by a rise in asset management, investment banking, and sales and trading revenues.
The provision for credit losses was a net benefit of $624 million in the quarter, reflecting a net reserve release of $1.1 billion. The company reported total loans and leases of $927.7 billion, down 2.9% from the prior-year quarter. Meanwhile, total deposits grew 15.4% to $1.96 trillion.
Bank of America’s Chairman and CEO, Brian Moynihan, said, “Each day clients entrust us with more of their business, whether it’s new checking and credit card accounts in Consumer; broader and deeper relationships in Wealth Management; increased commercial loan balances; or near record investment banking activities.”
On October 10, Jefferies analyst Ken Usdin maintained a Buy rating on Bank of America stock and raised the price target to $48 from $41. The new price target implies 6.5% upside potential.
The analyst expects investment banking and trading to continue to pick up market share. Also, Usdin anticipates consumer franchises to continue to witness low-cost deposit growth.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 4 Buys, 4 Holds, and 1 Sell. The average Bank of America price target of $44.94 implies that shares are fully valued at current levels.
BAC scores an 8 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to outperform market averages.
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