Like JPM, BAC said credit loses fell in the quarter and were below estimates.  I don’t know what we’ve ever had a recession that was not telegraphed by deteriorating consumer and small biz credit.  Seeing it strengthen is great for the economy.

BAC’s releases are rather boring now, that is good, banking should be.

CNBC:

Bank of America on Wednesday posted third-quarter results that exceeded analysts’ expectations on stronger-than-expected investment banking revenue.

Here’s what the company reported:

• Earnings per share: $1.06 vs. 95 cents expected, according to LSEG
• Revenue: $28.24 billion vs. $27.5 billion expected, according to LSEG

The second-largest U.S. bank by assets said profit rose 23% from a year earlier to $8.5 billion, or $1.06 per share. Revenue increased 10.8% to $28.24 billion.

 

Shares of the bank gained 4% Wednesday. They’ve climbed almost 19% so far this year.

 

Like its peers, Bank of America’s Wall Street businesses helped fuel the quarter’s results.

 

Bank of America said investment banking fees surged 43% from a year earlier to $2 billion, about $380 million more than analysts surveyed by StreetAccount had expected.

Equities trading also contributed to the quarterly beat; revenue there rose 14% to $2.3 billion, roughly $200 million more than the StreetAccount estimate.

 

Fixed income trading rose 5% to $3.1 billion, matching expectations.

 

Bank of America also benefited from an improved outlook around credit losses in the quarter. The company said its provision for credit losses fell about 13% to $1.3 billion, which is below the $1.58 billion StreetAccount estimate.

Net interest income rose 9% to $15.39 billion, about $150 million more than the StreetAccount estimate.

 

“With continued organic growth, every line of business reported top and bottom-line improvements,” CEO Brian Moynihan said in the earnings release. “Strong loan and deposit growth, coupled with effective balance sheet positioning, resulted in record net interest income.”

The buyback comes to ~11% of the current outstanding shares (offset for any future employee stock issuance). They also raised the dividend 8% to $.28/annually

The News:

Bank of America Corporation today announced the Board of Directors declared a regular quarterly cash dividend on Bank of America common stock of $0.28 per share, up $0.02 from the prior quarter. The dividend is payable on September 26, 2025 to shareholders of record as of September 5, 2025.

 

The Board also authorized a new $40 billion common stock repurchase program, effective August 1, 2025, to replace the company’s current program, which will expire on that date. As of June 30, 2025, the current program had approximately $9.1 billion in common stock repurchases remaining. Today’s authorization will continue providing additional capital return flexibility, reflecting the company’s commitment to return to shareholders excess capital that is not needed to support economic growth, deliver for customers and communities, invest in the future and sustain strength and stability through the economic cycle.

 

Bank of America’s ability to make capital distributions depends, in part, on its ability to maintain regulatory capital levels above minimum capital requirements.

The timing and amount of common stock repurchases made pursuant to the Bank of America common stock repurchase program are subject to various factors, including the company’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, regulatory requirements and general market conditions and may be suspended at any time. Such repurchases may be effected through open market purchases or privately negotiated transactions, including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

I said the whole time people were freaking out because Buffett was selling that whatever Warren was doing, he was not doing it because he thought there were issues at BofA.

Moynihan is as solid as they come, and he has this bank in a great spot.  Credit metrics are stable (supplemental materials), the share count is down 300M from Q4 2023, and growth is being seen in all segments.

Any complaints?

The dividend is at the low end for the major banks:

1. JPMorgan Chase & Co. (JPM) – 2.78%
2. Bank of America Corp. (BAC) – 2.35%
3. Wells Fargo & Co. (WFC) – 2.52%
4. Citigroup Inc. (C) – 3.98%
5. U.S. Bancorp (USB) – 4.19%
6. PNC Financial Services Group Inc. (PNC) – 4.07%
7. Goldman Sachs Group Inc. (GS) – 2.67%
8. Morgan Stanley (MS) – 3.12%
9. Bank of New York Mellon Corp. (BK) – 2.89%
10. State Street Corp. (STT) – 3.55%

The News:

4Q24 Financial Highlights

 

• Net income of $6.7 billion, or $0.82 per diluted share, compared to $3.1 billion, or $0.35 per diluted share, in 4Q234

 

• Revenue, net of interest expense, of $25.3 billion ($25.5 billion FTE),(A) up 15%. Adjusted for the 4Q23 BSBY cessation charge, revenue was up 8%.4 These increases were driven primarily by higher asset management and investment banking fees, and sales and trading revenue – Net interest income (NII) of $14.4 billion ($14.5 billion FTE),(A) up 3% from 4Q23 and 3Q24

 

The year-over-year increase was driven primarily by Global Markets activity, fixed-rate asset repricing and loan growth, partially offset by the impact of lower interest rates

 

The linked-quarter increase was driven by deposit favorability, higher loan balances, and fixed-rate asset repricing, partially offset by the impact of lower interest rates

 

• Provision for credit losses of $1.5 billion modestly improved from 3Q24 and increased from $1.1 billion in 4Q23 – Net charge-offs of $1.5 billion modestly improved from 3Q24 and increased from $1.2 billion in 4Q23 – Net reserve release of $14 million vs. net reserve build of $8 million in 3Q24 and net reserve release of $88 million in 4Q23(D)

 

• Noninterest expense of $16.8 billion, down 5%, driven primarily by the absence of the 4Q23 FDIC special assessment expense,4 partially offset by higher revenue-related expenses and investments in people, technology, brand and operations

 

• Balance Sheet Remained Strong – Average deposit balances of $1.96 trillion increased 3% – Average loans and leases of $1.08 trillion increased 3% – Average Global Liquidity Sources of $953 billion(E) – Common equity tier 1 (CET1) capital of $201 billion increased $1 billion from 3Q24 – CET1 ratio of 11.9% (Standardized);(F) above regulatory minimum of 10.7% – Returned $5.5 billion to shareholders; $2.0 billion through common stock dividends and $3.5 billion in share repurchases

 

• Book value per common share rose 7% to $35.79; tangible book value per common share rose 9% to $26.589 • Return on average common shareholders’ equity ratio of 9.4%; return on average tangible common shareholders’ equity ratio of 12.6%9

So the total buyback available now is $31.7B ($6.7B remains on previous buyback that expires 8/1).  In theory they could be buying the dip now with what remains (as of 6/30) on the initial buyback.

The dividend should end the year with about a ~$1.02 annual dividend which comes to ~2.4% yield at current prices which is below most peers

Now, the stock has run 24% YTD  and started the year with a 2.8% dividend which is better, but still below peers. 3%+ is really where they should be. They are returning ~$7.9B in dividends and ~$30B in buybacks.

When the stock hits $52 we will have our 3rd 10-bagger (excluding options trades) following GGP and AAPL.

The News:

Bank of America Increases Common Stock Dividend 8% to $0.26 Per Share, Authorizes $25 Billion Stock Repurchase Program

CHARLOTTE, NC – Bank of America Corporation today announced the Board of Directors declared a regular quarterly cash dividend on Bank of America common stock of $0.26 per share, up $0.02 from the prior quarter. The dividend is payable on September 27, 2024 to shareholders of record as of September 6, 2024.

The Board also authorized a new $25 billion common stock repurchase program, effective August 1, 2024, to replace the company’s current program, which will expire on that date. As of June 30, 2024, the current program had approximately $6.7 billion in common stock repurchases remaining. Today’s authorization will continue to provide additional capital return flexibility going forward, in line with the company’s commitment to return to shareholders excess capital that is not needed to support economic growth, deliver for customers and communities, invest in the future and sustain strength and stability through the economic cycle.

Bank of America’s ability to make capital distributions depends, in part, on its ability to maintain regulatory capital levels above minimum capital requirements.

The timing and amount of common stock repurchases made pursuant to the Bank of America common stock repurchase program are subject to various factors, including the company’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, regulatory requirements and general market conditions and may be suspended at any time. Such repurchases may be effected through open market purchases or privately negotiated transactions, including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

The Board also declared a regular quarterly cash dividend of $1.75 per share on the 7% Cumulative Redeemable Preferred Stock, Series B. The dividend is payable on October 25, 2024 to shareholders of record as of October 11, 2024.

The issue seems to be, according to Bank of America is that we are spending less. 

“U.S. consumers and businesses alike have turned cautious about spending this year because of elevated inflation and interest rates, according to Bank of America CEO Brian Moynihan.

Whether it’s households or small- to medium-sized businesses, Bank of America clients are slowing down the rate of purchases made for everything from hard goods to software, Moynihan said Thursday at a financial conference held in New York.”

Real Personal Income continues in an uptrend. Even with revisions that can confuse month-to-month commentary, the net of the current report is Real Personal Income is not displaying weakness typical of pending economic corrections. Other hard measures of economic activity agree with the many quarterly reports of continued growth in the US economy.

Consumer spending via card payments, checks and ATM withdrawals has grown about 3.5% this year to roughly $4 trillion, Moynihan said. That’s a sharp slowdown from the nearly 10% growth rate seen in May 2023, he said.”

Here is the Q1 report (pdf.)

All in all, a just fine report.  This is what is concerning, and it’s not just a BAC concern but a concern generally. Credit defaults are rising:

Now, I get these are low historically and currently no reason to be concerned. BUT, they do now need to be watched as they have been moving higher over the past year. Credit card losses are now at 3.6% vs 3.07% last year and are typically the first to show consumer stress (people will skip a credit card payment before an auto or home).  Above 4% is a reason for concern.

Delinquency rates can vary over time due to economic conditions, changes in lending standards, and other factors. “Generally”:

1. Credit Card Delinquencies: Delinquency rates for credit cards can fluctuate but typically range from around 2% to 4% during stable economic conditions. During economic downturns, delinquency rates may rise above 4% as consumers struggle to manage their debt.
2. Mortgage Delinquencies: Mortgage delinquency rates are typically lower than those for credit cards but can still vary based on economic conditions. During stable economic periods, mortgage delinquency rates may be around 1% to 2%. During recessions or housing market downturns, they can rise to 3% or higher.
3. Auto Loan Delinquencies: Delinquency rates for auto loans can be influenced by factors such as unemployment rates and changes in consumer behavior. In normal economic conditions, auto loan delinquency rates may range from 1% to 2%. During economic downturns, they can increase to 3% or more.

As of the fourth quarter of 2023, 4.2% of auto debt was at least 90 days late, which is up 11.8% from the fourth quarter of 2022. This is higher than the long term average of 3.48%. 7.7% of car loan debt is 30 days late, which is the highest level since 2010. 1.61% of borrowers are delinquent on their auto loan payment, which is defined as those who are 60 days or more late with a payment

As of February 2024, the overall mortgage delinquency rate in the United States is 2.8% and has been at less than 3% since February 2023. However, the delinquency rate for conventional loans increased 11 basis points to 2.61% over the previous quarter, while the FHA delinquency rate increased 131 basis points to 10.81%. This is the highest level since the third quarter of 2021

I’m not sounding an alarm here but rather, “let’s watch this”.  Rate cuts could easily reverse some of this if they happen but we need to wait and see as the Fed typically does very little in election years to not be accused of being political in its actions.

A solid report (click for pdf) with $2.9B in repurchases and dividends.  The stock is trading below BV, I’d like to see more buybacks at these levels.

A couple of other items: