Bank Of America In The Cross-Hairs Of The Fed

Bank of America (BAC) is currently trading at $17.62 per share, with a 52-week high of $18.48 and a 52-week low of $14.97. At the prevailing share price the company has a market capitalization of $184.13 billion with a Price/Earnings ratio of 18.36 and an EPS (Earnings Per Share) of 0.96. The 1-year target estimate for the stock is $19.26. On the scale of 1.0 (strong buy) to 5.0 (sell) Bank of America is rated at 2.2. When we analyze the upgrades and downgrades history from 2015 to date, there have been 3 downgrades and one upgrade. The latter was by the research firm Argus on July 17, 2015 from hold to buy.

Bank of America Year to Date Performance:

On the 22nd September Bank of America shareholders will make a decision as to whether the current chairman and CEO – Brian T. Moynihan will retain his job. Moynihan has been front and center with what could be the third reduction of share buybacks and dividends during his tenure. A week after shareholders decide on his fate (September 30, 2015), Bank of America will be submitting its strategic plans to the Federal Reserve Bank. Earlier in March 2015, the Fed found various weaknesses in Bank of America’s capital plan and these are going to be scrutinized closely. As the 2nd largest banking company in the U.S., Bank of America has been making one of the smallest payouts of all banks in the country. If the banking giant fails to make the grade with the Fed, many shareholders would rather see the back of Moynihan or at the very least a separation of Chief Executive Officer and Chairman roles. That Moynihan has been central to the resubmission to the Fed is a factor that is weighing heavily on investor sentiment vis-à-vis Bank of America futures. Already the bank has invested hundreds of millions of dollars in updating data systems.

From Mega Debt to Sizable Returns:

 

Bank of America Net Interest Income 2014/15

Bank of America has somewhat of a poor track record when it comes to Fed stress tests. In July, Bruce Thompson – the former CFO of Bank of America – resigned after being involved in two failures with the Fed. This time around however, it is the CEO and Chairman who will face shareholders without his right-hand man. Bank of America is uncertain what factors the Fed will be evaluating in its upcoming stress test.