Bank of America Q4 preview: Where next for BAC stock?

Bank of America is touted by some to be a top pick among US bank stocks for 2022 on expectations that higher interest rates will significantly boost profitability.

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When will Bank of America release Q4 earnings?

Bank of America will publish fourth quarter earnings before markets open on Wednesday January 19.


Bank of America Q4 earnings preview: what to expect from the results

Wall Street forecasts Bank of America will report a rise in fourth quarter managed revenue to $22.9 billion from the $20.2 billion booked the year before. Pretax income is seen climbing to $7.4 billion from $6.1 billion, with diluted EPS forecast to grow to $0.76 from $0.59.

Revenue and earnings are expected to grow across its Consumer Banking, Global Banking, and Global Wealth & Investment Management units, which will be enough to offset a mild decline in both measures from its Global Markets division. Below is a breakdown of the expected net income from each segment and how the estimates fare versus the results from the same period last year:

  • Consumer Banking: $3.03 billion (vs $2.59 billion)
  • Global Banking: $1.96 billion (vs $1.68 billion)
  • Global Markets: $761.8 million (vs $791.0 million)
  • Global Wealth & Investment Management: $1.11 billion (vs $834.0 million)

Bank of America shares rallied almost 47% during 2021, outperforming the 33% rise booked by the Dow Jones US Bank Index and the 27% increase booked by the S&P 500. Markets are bullish that Bank of America could be set to outperform its peers again in 2022 considering it is one of the most sensitive to interest rate hikes, with three 0.25% increases currently pencilled in over the next year and some other leaders in the banking industry are anticipating even more will be needed if the Federal Reserve wants to get on top of rapid inflation. Numerous media reports suggest a 100-basis point rise in rates (equal to four 0.25% increases) would boost Bank of America’s annual net interest income by around $7.2 billion. For context, it generated $31.5 billion in net interest income in the first nine months of 2021.


Where next for BAC stock?

Bank of America shares hit all-time highs on January 10 after breaching the $50 mark for the first time. The stock has dipped in the last few days but the uptrend that started as we entered 2022 is still intact and we could see the stock surpass the $50 mark again and climb to fresh highs if Bank of America impresses with its results and/or outlook. The RSI remains bullish but a slip into overbought territory could lead to a temporary dip in price as it has done in the past.

On the downside, any disappointment could see Bank of America shares slip to the 50-day sma at $45.94, which would also close the small gap created when the stock surged higher at the beginning of the new year. A breach beyond the 100-day sma at $44.65 would be more significant considering it provided support on several occasions during December.

Where next for BAC stock?

(Source: Eikon) 


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