Bank of America's stock market to a profit after the conference after earnings

admin July 17, 2019

12 2 minutes read

Bank of America's stock market to a profit after the conference after earnings

Shares in Bank of America Corp. looks forward to a gain on Wednesday, when the bank lowered its full-year view of net interest income, but still expected growth in the face of expected interest rates and weakened economic growth.

The Consumer and Investment Bank also reported before the opening of a quarterly result that hit expectations, but net interest income that came up a bit shy. Meanwhile, sales and trading revenue fell by 10%, while interest income, currency and commodity revenues declined by 8% – a fourth quarterly decline – and stock turnover went down 13% after declining by 22% in the first quarter.

Ingredient

BAC, + 2.1[ads1]6%

climbed 1.4% in active morning trading, and reversed premarket loss of as much as 1.3%. Trading volume of more than 32.6 million shares made the most trading on major US stock exchanges, according to FactSet.

At the conference after earnings with analysts, CFO Paul Donofrio 2019 cut NII growth outlook to 2% assuming stable interest rates. Assuming the Federal Reserve lowers interest rates twice a year, which assumes the "forward" yield curve, the NII growth will be about 1%. Three months ago, BofA reduced its NII growth outlook to "about" 3% this year in a stable pace environment.

Actual consensus of $ 49.63 billion meant an increase of 3.3%.

See related : Fed's Powell says trade fears restrict the economy, hit interest rate cuts soon.

By comparison, Wells Fargo & Co. rivaled

WFC, + 0.26%

said on Tuesday that it expected 2019 NII to decline almost 5%, while JPMorgan Chase & Co.

JPM, -0.74%

reduced their NII outlook to $ 57.5 billion from "$ 58-billion", representing a 3.2% increase.

Don't miss : Wells Fargo's stock falls after another disappointing view, hawkish rate view.

For 2020 it was a bit early to provide guidance, since the price decline is still uncertain Donofrio said that the forward curve expects a reduction in 2020 – and the reason for price reductions is still unknown.

Regarding concerns over the economic outlook, CEO Brian Moynihan said on the conversation that "solid" consumer activity pointed to continued growth, only at a slower pace.

"On the surface, B. sees A. results out a bit boring and in line with expectations," said Octavio Marenzi, chief executive of Capital Marketing Consulting Opimas. "But dig deeper, some things stand out. The Consumer Banking Group did far better than expected, with a net income of 13%. "

What the bank said in the next 12 months, however, is that it intends to return $ 37 billion of capital to its shareholders, which will be in the form of a 20% increase in quarterly and more than $ 30 billion in gross share buyback

Based on the current quarterly dividend of 15 cents per share, a 20% increase would indicate a payout of 18 cents a share, and based on current share prices, the implied annual dividend of 72 cents per share would yield a dividend of 2.45% compared to the implicit interest rates for SPDR Financial Select Sector listed funds

XLF, -0.37%

of 1.96% and for S & P 500

[19659000] SPX, [0.25] -0.25%

of 1.93%, according to FactSet.

Meanwhile, the buyback plan on current stock prices involves 1.02 billion shares, or about 11% of the outstanding shares. During the last 12 months, CEO Moynihan said the bank repurchased 7% of the outstanding shares.

The portfolio has climbed 19.3% so far, while SPDR's financial ETF has advanced 17.3% and the S & P 500 index has increased 19.4%.

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