Bank of America’s (NYSE:BAC) high asset sensitivity positions it well to benefit from the rising interest rate cycle. The company also has strong loan growth prospects as its loan growth has lagged deposit growth since Covid and there is a good chance to catch up. There is a short-term headwind as the company is planning to discontinue its overdraft charges which will result in a $1 billion hit for the topline. But I believe, in the long term, it will make the company more competitive and thus attract more consumers. Further, its impact will be much lower compared to the impact of investments that some of its global banking peers like JPMorgan Chase & Co. (JPM) are making, and BAC should see a swift recovery in EPS in FY23 and beyond. The stock is trading at 13.32x FY22 EPS estimate and 11.41x FY23 EPS estimate and I believe it is a good buy at the current level given its strong long-term growth prospects.
Last Quarter Earnings
Earlier this year, Bank of America Corporation reported fourth-quarter results for the period ending Dec 31, 2021, with total revenue, net of interest expense rising 10% year over year from $20 billion to $22.1 billion, owing to an increase in both net interest income and non-interest income. Strong deposit growth and investment of excess liquidity boosted net interest income (NII) by 11% year over year from $10.25 billion to $11.41 billion. Non-interest income increased by 8% year over year due to an increase in asset management fees and investment banking revenue. Better asset quality and macroeconomic improvements helped in releasing $489 million in the provision of credit losses. Non-interest expenses increased 6% to $14.7 billion because of higher revenue-related incentive compensation partially