A Notable Interest Was Put On The BOfA Before The End Of The Federal Reserve’s Two-Day Policy Meeting.
Among the financial stocks, Bank of America (NYSE:BAC) (BOfA) has been catching the attention of the market players these past few days due to its impressive market movement. The stock was seen soaring as the likelihood of a Federal Reserve interest rate hike loomed.
Stock Appreciation on Fed Hike
Since the start of the year, the stock posted a bullish trend as after it commenced at 22.00 levels and recently climbed at 25.00 levels. The BOfA significantly moved higher after the first interest rate hike of the Fed on December 2016. As shown in the chart below, the stock was only between 14.00 to 17.00 prior to the central bank’s monetary policy changes.
The tone for the BOfA will probably be similar now that the Fed is anticipated to implement the first rate hike in 2017. The U.S. central bank has indicated on its previous statement that there could be three rate hikes this year given that the U.S. economic recovery has been stabilizing.
Economic and political stability play a vital role in the rate decision of the Fed. In-line with this, the stock market optimism lit up after Trump administration’s pledge of tax reduction and increase of fiscal spending. In the latest data provided by the Organization for Economic Cooperation and Development, the U.S. GDP growth is forecasted to surge 2.4 percent in 2017 and in the succeeding year.
Upward Momentum
Meanwhile, the BOfA slipped a little after the opening bell on Tuesday. After the series of green candles, the stock declined 0.36 percent in the pre-market and went flat at $25.30 as of 14:30 UTC. The stock has a session high of 25.41 and a session low of 25.13.
Despite the red figures in the chart, analysts still bet for the bullish run of the stock in consideration of its current trading range. The stock was almost halfway from its all-time high of 54.81 reached in 2006 and far from its bottom at 2.87 in 2009.
In light of the apparent impact of the rate increase, it is reasonable that the stock will continue to soar in the following days, should the Fed imposes the widely expected rate adjustments. With two more rate hikes, investors must keep their attention on the BOfA.
Chief Financial Officer Paul M. Donofrio noted in the last earnings reports that:
The recent rise in interest rates came too late to impact fourth-quarter results, we expect to see a significant increase in net interest income in the first quarter of 2017.
For the fourth quarter of 2016, the net interest income advanced 6 percent to $10.3 billion acquired from higher interest rates and growth in loans and deposits. The bank reported net income of $4.7 billion, with earnings per share of $0.40.
BOfA Chief Executive Officer Brian Moynihan explained:
We are lending more and seeing historically low charge-offs, which is what responsible growth is all about. Revenue was up modestly, but EPS grew by 15% as we continued to manage our expenses and create operating leverage.
Adding to this, the BOfA increases planned common stock repurchases for the first-half of 2017 by $1.8 billion to $4.3 billion. Currently, the stock has a market capitalization of $253.24 billion, with a price earnings ratio of 16.94 and dividend yield of 1.19 percent.