NEW YORK (TheStreet) -- Bank of America (BAC - Get Report) stock is falling by 0.81% to $12.17 in afternoon trading on Tuesday, as investors worry about what impact slowing global growth, tumbling oil prices and low interest rates will have on financial companies.
Economists expect lower interest rates and fewer rate hikes by the Federal Reserve, even as the U.S. continues to add jobs, the Wall Street Journal reports. The U.S. Treasury yield dropped to its lowest level in a year yesterday, at 1.74%.
Additionally, plunging oil prices are exacerbating concern about banks' balance sheets.
Bank of America specifically had $21.3 billion in energy-related loans as of its most recent earnings release, CNBC.com reported. The energy loans make up roughly 2% of the company's total loans.
"We're six years from the financial crisis, and there's no confidence that the banks are going to do better," Brad Hintz, a former bank-stock analyst and chief financial officer at Lehman Brothers Holdings, told the Journal. "Bank stocks have shifted to being trading vehicles" for betting on a possible recession, he continued.
Insight from TheStreet Research Team:
Within the Action Alerts PLUS portfolio, shares of Bank of America have experienced heavy selling pressure over recent weeks given reduced expectations around a potential Fed rate hike this year. Despite the negative sentiment, we consider the shares attractive and believe the bank can become materially more efficient and grow tangible book value (we target $17 by year-end), and view its valuation gap on a price-to-tangible book value basis as unjustified.
BAC is trading at recessionary levels despite the absence of a recession. Even in a domestic recession, Bank of America would be able to grow its book value from $15.62 currently (based on analysis performed by analyst Mike Mayo, who had been BAC's biggest bear until he upgraded shares to Buy from Sell last Friday).
We do not believe investors are giving Bank of America credit for a much-improved balance sheet, improved capital ratios and potential for major capital returns (we estimate the bank will be able to double buybacks and its dividend in 2016 alone). We have held back from adding to our position (which is relatively small vs. our portfolio average) but would consider buying if the shares retreated below $12.20.
-Jim Cramer "Bank of America, Facebook, Alphabet: Selloff Doesn't Diminish Solid Fundamentals" Originally Published on 2/9/2016 on Real Money.
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Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B-.
Bank of America's strengths such as its revenue growth, growth in earnings per share, increase in net income, attractive valuation levels and expanding profit margins outweigh the fact that the company has had lackluster performance in the stock itself.
You can view the full analysis from the report here: BAC
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.BAC data by YCharts