Bank Of America’s ‘Low-Quality’ Beat (NYSE:BAC)

Bank of America Corp (NYSE: BAC) reported its second-quarter results, which came in ahead of expectations but according to one analyst should be viewed as a “low quality” beat.

UBS analyst Saul Martinez maintains a Neutral rating on Bank of America’s stock with an unchanged $26 price target after the earnings report was “messy” with positive and negative non-core items mostly “washing” each other out.

Net Interest Income A Brief Concern

Bank of America’s net interest income (NII) fell 0.3 percent sequentially to $11.2 billion, but was up 8.5 percent year-over-year, Martinez said. It also fell short of the $11.3 billion expected as higher short-term rates were offset by funding costs within the Global Equities division.

However, Bank of America “somewhat encouragingly” did say it expects growth in NII in the third quarter despite a $130 million headwind related to the sale of its UK cards business.

Now What?

Given the less-than-expected NII in the quarter, it appears the bank’s results were “mixed” as earnings within most business segments were merely in-line with expectations.

Looking forward, management guided to a 4 percent reduction in 2018 expenses to $53 billion. Any potential reductions below this figure after 2018 should be “positively received,” especially when factoring in continued NII headwinds from low rates.

Related Links:

After Q2 EPS Beat, Is Bank Of America Underappreciated?

Where Will The Money Rotate In Q3?

Latest Ratings for BAC

Date Firm Action From To
Jul 2017 Oppenheimer Maintains Outperform
Apr 2017 Berenberg Downgrades Buy Hold
Apr 2017 Citigroup Downgrades Buy Neutral

View More Analyst Ratings for BAC

View the Latest Analyst Ratings

Posted-In: bank earnings Saul Martinez UBSAnalyst Color Analyst Ratings


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