On Tuesday, RBC (TSX:RY) Capital Markets adjusted its outlook on Bank of America Corp (NYSE: NYSE:BAC), increasing the price target to $46 from the previous $39, while maintaining an Outperform rating on the shares. The revision reflects the firm's confidence in the bank's diversified business model and its ability to perform well even in uncertain times.
Bank of America's strategy of expanding its deposit base and complementing that growth with loan offerings is expected to contribute to more robust long-term earnings growth. RBC Capital highlighted the bank's low-cost deposit foundation as a particular advantage in a sustained high-interest rate environment, which could distinguish it from competitors.
The financial institution's efforts to reduce risks on its balance sheet over the past decade and a half were also noted. RBC Capital anticipates that Bank of America will effectively navigate the expected normalization of credit trends in the upcoming 12 to 18 months. The firm believes that this will occur without any significant negative effects on the bank's net income or capital.
Bank of America's approach to managing its deposit and loan growth, especially in a fluctuating interest rate landscape, has been instrumental in securing its leading position within the financial sector. The updated price target reflects the bank's steady progress and the expectation of continued financial health and operational strength.
In other recent news, Bank of America's second quarter earnings report revealed a per-share earnings of $0.83, surpassing the consensus estimate of $0.80, despite marking a decrease from the $0.88 reported in the same quarter the previous year. The bank's net revenues saw a modest increase of 1%, with a notable 29% surge in investment banking revenues. Following a positive Comprehensive Capital Analysis and Review (CCAR) result in June 2024, the bank announced an 8% increase in its dividend.
Bank of America also reported a 20% increase in revenue from equities trading, reaching $1.9 billion. This was echoed by other Wall Street banks, including Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Citigroup, and Wells Fargo (NYSE:WFC). In addition, the bank's stock rating was upgraded from Underweight to Neutral by Piper Sandler, influenced by expectations of net interest income reaching its lowest point in the second quarter of 2024, followed by a projected increase.
Other recent developments include a lawsuit against Bank of America and other major banks over alleged overcharging for "odd-lot" corporate bond trades, which is ongoing at the 2nd U.S. Circuit Court of Appeals. Furthermore, Bank of America has amended its bylaws to clarify the process for holding shareholder meetings remotely and the voting requirements for certain decisions. These are the highlights of recent developments.
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