Bank of America (BAC) - Get Report reports fourth-quarter results before the market opens on January 13 and investors will be looking to see if the stock's tremendous run over the past two months has more life in it or if it needs a break.
Since the election, when Donald Trump unexpectedly won the presidency, financial service companies have led the rally in U.S. stocks, with Bank of America surging. Shares have gained nearly 35%, outperforming competitors like JPMorgan Chase (JPM) - Get Report , Citigroup (C) - Get Report and WellsFargo (WFC) - Get Report .
Much of that run is due to rising interest rates, which help the bank's net interest margin (NIM), or the spread it generates on loans it makes versus what it pays in deposits.
Society Generate recently upgraded shares of Bank of America on the "Trump effect," saying it expects it to be one of the biggest winners because of higher rates.
"We expect BoA to be one of the biggest beneficiaries of Trump's likely policies for the banking sector," Society Generale analysts wrote in a note to clients. "We increase our revenue forecasts (especially net interest income) and cut our tax assumptions accordingly, resulting in our 2018 net earnings estimate being c. 40% ahead of consensus."
Investors will also be looking to hear any update on what the company expects from the incoming administration on undoing the Dodd-Frank regulation, which has severely impacted financial service companies ability to earn money in a variety of ways.
Analysts surveyed by Yahoo! Finance expect the company to earn 38 cents a share on $20.87 billion in revenue.
Over the past year, shares of the Charlotte-based financial services company have gained nearly 50%, significantly outperforming the near 9% gain in the S&P 500.
Here are three ETFs that may benefit if investors like Bank of America's fourth-quarter results.
iShares U.S. Financial Services ETF
In addition to the increase in net interest margins, a Trump presidency may help the tax rates for Bank of America, as well as a return of capital, which should benefit shareholders.
"We expect a cut in the U.S. corporate tax rate (we model to 20% from 35%) to decrease BoA's tax charge by the equivalent of c. 20% of consensus FY17 net profit," SocGen analysts wrote in the note, calling the impact to Bank of America "relatively material" because of its high proportion of profits that come from the U.S., which the analysts estimate at 85%.
In addition, the company could return additional capital to shareholders, which could benefit 2017 earnings by as much as 10%, all thanks to a Trump presidency.
PowerShares KBW Bank Portfolio ETF
Investors will be looking to hear about the company's recent run-in with the FDIC, with the federal agency saying Bank of America owes it at least $542 million because of underpayments several years ago.
Keefe, Bruyette & Woods analysts, led by Brian Kleinhanzl, believe that the impact could be as much as $1 billion, since it goes back 2011.
"We would consider any catch-up FDIC insurance expense to be non-operating; however, we estimate that the $542M charge would reduce our 2017 TBV estimate by $0.04 or -0.2%, increasing to $0.06 or -0.4% should the ultimate charge be closer to $1B," the analysts wrote in a note to clients.
Financial Select Sector SPDR Fund
Credit Suisse analysts led by Susan Roth Katzke recently wrote that Bank of America has multiple catalysts going forward, including: the ability to grow revenue organically, become more efficient and cut expenses and return more capital to shareholders. The bank has an outperform rating and a $28 price target on shares.
"Increasing return on tangible equity prospects-through improved earning power and effective balance sheet and capital management, with reduced earnings volatility will be key to a higher multiple," Credit Suisse analysts wrote in a note to clients. "Firm's 1.5% dividend yield coupled with 8% average book value growth ought to translate to reasonably attractive return."