On Wednesday, BMO Capital Markets adjusted its outlook on Bank of America Corp (NYSE:BAC), raising the price target to $37 from $36, while maintaining a Market Perform rating on the shares. This revision follows the company's first-quarter revenue surpassing expectations.
The bank's recent financial performance prompted BMO Capital to increase its estimates by 3%. A notable rise in non-interest income, including equity capital markets, advisory services, fixed income, currency and commodities trading, as well as investment and brokerage fees, contributed to this adjustment. These gains are expected to counterbalance the predicted rise in credit provisions, which have been deferred to the second half of 2024, and an increase in operating expenses, primarily due to compensation.
Bank of America has reaffirmed its previous guidance, anticipating a rebound in net interest income (NII) in the latter half of the year, with NII expected to reach a low of $14 billion in the next quarter. The bank also forecasts a sequential decrease in the elevated operating expenses noted in the first quarter throughout the remainder of the year.
The new price target set by BMO Capital is based on a valuation of 1.2 times the two-year-forward tangible common equity (TCE), which is derived from a 12% return on tangible common equity (RoTCE) and a 10 times target price-to-earnings (P/E) ratio.
InvestingPro Insights
With Bank of America Corp's (NYSE:BAC) recent financial performance surpassing expectations, it's important for investors to consider additional insights. According to InvestingPro, the company has demonstrated a commitment to shareholder returns, raising its dividend for 10 consecutive years. This aligns with the bank's projection of a rebound in net interest income, which could further support dividend sustainability. Moreover, Bank of America has been recognized as a prominent player in the Banks industry, which may instill additional confidence in its market position.
The bank's market capitalization stands at a robust $272.82 billion, with a healthy Price to Earnings (P/E) ratio of 12.41, reflecting investor confidence in its earnings potential. Additionally, the bank has maintained a Price to Book value (as of the last twelve months ending Q4 2023) of 1.04, suggesting that the shares are reasonably valued in relation to the company's net assets.
Investors looking for further analysis and tips, including seven analysts who have revised their earnings upwards for the upcoming period, can explore more by visiting InvestingPro. There are a total of 9 additional InvestingPro Tips available, which can be accessed with a special offer using the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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