Bank of America Corporation (BAC): A Bull Case Theory

We came crossed a bullish thesis on Bank of America Corporation on The Passive Income Portfolio’s Substack. In this article, we volition summarize the bulls’ thesis on BAC. Bank of America Corporation's share was trading astatine $52.97 as of January 19th. BAC’s trailing and forward P/E were 13.90  and 12.15 respectively according to Yahoo Finance.

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Bank of America Corporation, done its subsidiaries, provides assorted fiscal products and services for idiosyncratic consumers, tiny and middle-market businesses, organization investors, ample corporations, and governments worldwide. BAC is simply a high-quality fiscal franchise presently trading astatine a discount owed to near-term sound astir nett involvement income (NII), commercialized existent property exposure, and unrealized losses connected its held-to-maturity (HTM) securities.

While marketplace sentiment remains skeptical, BAC’s existent spot lies successful its semipermanent capableness to make distributable capital, underpinned by a massive, low-cost deposit basal and diversified gross streams, including Global Banking and Merrill’s wealthiness absorption platform. These factors supply a unchangeable backing instauration and counter-cyclical interest income, insulating the slope from cyclical lending pressures.

The dividend thesis is compelling: BAC maintains a blimpish EPS payout ratio of roughly 32%, allowing important superior retention for buybacks and aboriginal dividend growth. Its track record shows 12 consecutive years of dividend increases, with precocious single-digit maturation rates implicit the past 3 to 5 years. Combined with stock number simplification done buybacks, this positions BAC for sustainable semipermanent dividend maturation of 6–8% annually, supporting a full instrumentality imaginable of approximately 9–10% erstwhile factoring successful the existent 2.1% yield.

BAC’s equilibrium expanse is robust, with a beardown CET1 ratio and prudent liquidity and loan-to-deposit metrics, ensuring resilience against regulatory and recognition shocks. Key risks see stricter Basel III requirements, adverse CCAR outcomes, CRE marketplace stress, and worsening HTM portfolio losses; a CET1 ratio falling beneath 11% would awesome a imaginable breach of the dividend maturation thesis.

Overall, BAC represents a uncommon “Core Compounder with a Cyclical Value Lean,” offering a well-capitalized, low-risk level for semipermanent dividend-focused investors. Current valuations supply a strategical introduction point, with the $34 “buy-under” terms embedding borderline of information portion capturing its durable maturation and shareholder instrumentality potential.