On Jul 3, 2014, we issued an updated research report on Bank of America Corporation (BAC). Various restructuring and expense-savings initiatives that were being undertaken by BofA have started bearing fruits.
BofA‘s Project New BAC was initiated with a goal to improve overall efficiency. The company anticipates total cost savings to reach $2.0 billion per quarter by mid-2015. Notably, driven by the initiatives, BofA achieved nearly $7 billion of cost savings in the last two years.
Additionally, BofA is undertaking several restructuring measures to remain profitable. The company has divested or closed non-core operations as well as consolidated branches.
As a result of these efforts, first-quarter operating expenses (excluding litigation expense and retirement-eligible incentive compensation costs) declined about 6% year-over-year. This also supported the bottom line (to some extent) from decline in revenues.
However, the re-submission of a tapered 2014 capital plan and the persistent litigation overhang make us apprehensive. Further, given the continued low rate environment, no significant improvement in interest yield is expected over the next several quarters.
Over the last 30 days, the Zacks Consensus Estimate for 2014 fell 1.1% to 92 cents per share, while for 2015 it decreased 1.3% to $1.51 per share.
BofA presently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked banking stocks include Comerica Incorporated (CMA), Huntington Bancshares Incorporated (HBAN) and Associated Banc-Corp (ASBC). All these stocks carry a Zacks Rank #2 (Buy).
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