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Stock Analyst Update

Bank of America Reports Solid Q1 Results

With roughly flat net interest income compared with last quarter and higher fee income, revenue is generally holding up.

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Wide-moat Bank of America (BAC)  reported decent first-quarter earnings, with EPS of $0.86 easily beating FactSet consensus EPS of $0.66, equating to a return on tangible common equity of 17% for the quarter. The biggest swing factor was the firm's provisioning for credit losses. As we had expected, the bank released a sizable portion of reserves, totaling $2.7 billion. We have been more bullish than consensus on reserve releases, and we think Bank of America could release even more as the year develops (we already have nearly $1 billion more penciled in for 2021).

Overall, with roughly flat net interest income compared with last quarter and higher fee income, revenue is generally holding up. The most disappointing line item was expenses, with management raising guidance here. After incorporating these results into our projections, we are our maintaining our fair value estimate of $35 per share for Bank of America.

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Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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