NEW YORK (TheStreet) -- Bank of America (BAC) CEO Brian Moynihan expects a major improvement in the company's earnings performance over the next few years, bringing it close to the performance level of JPMorgan Chase (JPM), but which stock is a better long-term play?
When asked about the company's goals for returns on assets (ROA) and equity during an earnings conference call on Jan. 15, Moynihan said "we are looking to get to the point where we are returning 1% on assets, which translates into a 14% return on tangible common equity. Those are the types of levels that we see ourselves looking to achieve over the course of the next three years," according to a transcript provided by Thomson Reuters.
Bank of America's ROA during 2013 was 0.53% and its Return on Average Tangible Common Equity (ROTCE) was 7.94%, according to Thomson Reuters Bank Insight. Going forward, major U.S. banks will see a drag on ROTCE because they are meeting much higher minimum capital requirements required under the international Basel III agreement and the Dodd-Frank banking reform legislation of 2010.
Bank of America's earnings performance during 2013 was its best since 2007, as the company has been recovering from the credit crisis and its disastrous purchase of Countrywide Financial in July 2008 as the housing market was collapsing. The bank's ROA was 0.94% and its ROTCE was 27.46% during 2007, and its ROA ranged from 1.30% to 1.34%, with ROTE ranging from 27.45% to 36.86% from 2004 to 2006. Looking several years out, those ROTCE figures won't be possible with tangible common equity ratios rising so much over the past few years.