This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Bank of America is Flush With Capital: Analyst

Stocks in this article: BACCJPM

Staite estimates that by the end of 2014, "JPM will eliminate its deficit but by this stage BAC will have amassed $29bn in surplus equity."

The analyst expects Bank of America to be approved to repurchase $4 billion worth of common shares during 2013, with buybacks increasing to $10 billion in 2014, which will "shrink BAC's shares outstanding by around 10% which provides part of the explanation for why our 2014 EPS estimates are 25% above consensus." The consensus among analysts polled by Thomson Reuters is for Bank of America to earn 97 cents a share in 2013, with EPS increasing by 29% in 2014 to $1.25.

Staite estimates that Bank of America will earn $1.23 a share in 2013, increasing to EPS of $1.53 in 2014.

Bank of America's shares currently trade for 10.9 times the consensus 2013 EPS estimate and for 8.6 times Staite's 2013 estimate. The analyst said that "the build-up of surplus capital will also reduce the perception of risk around BAC and drive an increase in the valuation multiple."

A Contrary View


KBW late on Tuesday announced that it was transferring its coverage of Bank of America from Jefferson Harralson and maintaining its "Market Perform" rating on the shares, with a $10 price target, and cutting its 2013 EPS estimate to 95 cents from $1.10, "due to lower expectations in spread income and revenues in global markets." Spread income will certainly not be helped by the Federal Reserve's announcement on Wednesday that it will at least temporarily continue its monthly purchases of $45 billion in long-term Treasury securities and $40 billion in mortgage-backed securities in 2013, while keeping the short-term federal funds rate in a range of zero to 0.25% until the U.S. unemployment rate improves to 6.5%.

KBW also established a 2014 EPS estimate of $1.20 for Bank of America, with the estimate increasing to $1.30 for 2015.

Despite the neutral assessment, KBW analyst David Konrad said that "we expect core earnings for BAC to improve through 2013," with "continued improvement in US housing, the company's cost-cutting initiatives, and continued benefits from liability management, that may help support spread income during a very challenging interest rate environment."

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs