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Bank of America (BAC) Stock Analysis - Buy BAC Before $25B Buyback & Dividend Increase?

what is going on investors hopefully you

guys are doing well out there that's

right we're back again

with more earnings reports videos today

we're going to talk about bank of

america corporation which reported their

q1

earnings this morning we're looking at

ticker symbol b

a c here we'll run through the numbers

we'll take a look at

their different financial divisions

we'll take a look at the profit

we'll take a look at the income we'll

take a look at all that stuff and then

we'll get over to the stock chart as

well this one's pulling back a little

bit today

we'll talk about if there's some zones

this one pulls back into

because it could potentially be a buying

opportunity now year-to-date this stock

has been ripping up

31 we got a 1.81 percent yield

on this one but guess what

beckomerograph telegraphed

that they will be increasing that

dividend

at some point now they did announce a 25

just

25 billion dollar buyback plan so that's

nice it looks like they will do that

over a period of time they didn't really

give a set period

they also authorize repurchases of

shares

when they have equity-based compensation

plans

so imagine how cool that is you're an

executive of a big bank

you get paid with shares so you can sell

those

back into a buyback that the company

pays for that must be a pretty sweet gig

now here's the thing though following

these restrictions so if you're not sure

the federal reserve is starting to ease

some restrictions based on

some capital requirements that these

banks have now bank of america is

extremely well capitalized in fact they

have

35 billion dollars in excess capital

that the federal reserve is requiring

them so what they're going to be able to

do

is use some of that money for this

buyback but they also said

following the expiration of the

restrictions

the company expects to distribute

additional capital

shareholders likely through buybacks and

dividends as well i would expect a

dividend hike

on this stock at some point now it could

be priced in

from investors to a certain degree over

the last year but

a dividend hike nonetheless would be

nice now from the top line perspective

and the bottom line perspective

it was a beat across the board let's

jump into the numbers here now

broadly and we talked about this

yesterday when we looked at jp morgan

and wells fargo and these other banks

that you could potentially look at

across the board what seems to be going

on with the consumer

our deposits are up 25 percent

with bank of america but loans are

actually down 8

so we're actually seeing a deleveraging

by consumer so there's two ways that you

can look at this

is that's not necessarily a good trend

for uh you know banks like bank of

america

that rely on consumers taking loans now

it could be a tailwind at some point

because at some point consumers are

gonna potentially

run through these deposits and then have

to take out new loans or because they

feel financially secure because they

have a lot of money in the bank

they go out and buy a new car they go

take out a new credit card or they take

a vacation

and put that on credit or something like

that that could be a tailwind for these

banks now we're taking a look at their

consumer banking

bank of america has three or four

different divisions we'll take a look

broadly at them all we'll take we'll

take a finer

grain look at the consumer banking site

so we've got since it is the largest

of their business models so we've got

total revenue here

we're seeing that this total revenue is

actually going down okay so we've got a

year over year view and this is quarter

over

quarter these two columns we see in both

cases

revenue is going down we're at eight

point call that one billion

001 billion dollars and uh you know

i was higher three months ago and it was

even higher a year ago despite what was

going on and kind of launching itself

here in the united states and across the

world a year ago now what is

completely different this year is this

provisions for credit losses so

as you recall these banks last year were

setting aside major amounts of money

okay the pandemic was just coming

on shore here in the united states they

weren't sure what the heck was going to

go on

okay and so they were starting to put

aside money because they weren't sure

if credit cards would start getting

defaulted on

home loans car loans all those types of

things might get defaulted on

banks by rule and and really out of good

practice

set aside money to cover those loan

losses

they set aside 2.2 billion dollars

last year and you see just in the last

quarter that we had

they barely set aside any money and

guess what happened this quarter they

they actually released that money back

into

the company and so when you see

parentheses like that choosing means a

negative number

in this case it's actually a positive it

means that this money is coming back

into the company we'll see here in a

minute how that impacted net income as

well so we've got some non-interest

expenses all expenses

related to anything other than interest

and you actually see

even though we have revenues declining

interest expense is actually

rising but not too bad we've got some

pre-tax income here we actually

see that despite declining revenues

our pre-tax revenue is actually up

partly or

almost mostly due to the fact that we

didn't

provide credit losses we actually got

that money back

and so that helped pre-tax income and

that obviously helped net income because

we had expenses rise

revenue decline but because of this

provision for

credit losses got better net income

increased

tremendously again this is not

necessarily a one-time thing

but it is not something that necessarily

will recur

year after year because you don't

typically have these big gigantic

kind of provisions and then take them

back that is not something that is

standard

in the banking industry it's something

that happens only in extraordinary

events like we've had

over the last year so this is not

necessarily something that i would

expect to recur

but take a look our net income is

actually up in here

now let's take a look broadly at the

consumer we see average deposits here

up to 924 again that's over that's way

that's pretty far above over last

quarter and way

above where we were over the last year

so we're seeing

big time increases there and here's our

average loans and leases

we're seeing that is just consistently

declining

over the last year so again you can look

at this two different ways that that

could potentially be a

tailwind for a business like bank of

america in the future

once loans and leases start to pick up

they also have

quite a bit of average deposits here to

borrow against as well you also have

interest rates that have just been

ripping higher over the last six months

or so

although we've seen them pull back here

recently you know it's interesting

because

interest rates have been ripping higher

that also could be a reason why

consumers are willing to borrow less

because the cost to borrow just

continues to go up you also see her

average credit card outstanding balance

that is also ticking down as well again

that's a positive in some cases

but for a business like bank of america

you know you'd actually like to see

people use their credit especially when

balances are up now here's the global

wealth and investment management

business

this has been a very steady business and

so you

actually i like to see this with bank of

america you get

obviously a big window into the consumer

big revenue there

but you get the steadiness of this

growth well wealth management and

investment business

take a look revenues basically flat

basically

steady across the board essentially up

just slightly

over the last year you take a look at

net income here that is just steadily in

this 800 million dollar range okay we've

got average deposits that

up now we take a look at this side of

the business

loans are actually up and flat

quarter over quarter so this is a very

steady business

so even though the consumer is kind of

fickle and we know this

just based on our own kind of actions

the consumer can be fickle they can keep

more money in the bank they can decide

to put a bunch of stuff on a credit card

or a loan

whereas businesses tend to be a little

bit more steady you get a nice little

bit of that now here's global banking as

well

seeing a similar type thing here at

least on this top line here

top line staying really steady we had

this big gigantic provision for credit

losses

this got flowed back into the balance

sheet that really helped our net income

here okay take a look

at last year this time we only made i

say only but 138 million dollars here

okay that is because we had to set aside

2.1 billion dollars for credit losses

now we released 1.1 billion of that

into here and we ended up netting out

2.1 billion

that's way over what we did in the last

quarter so you had big

impacts on the balance sheet here as

well you got average deposits up quite a

bit but average loans and leases

also down again could be considered a

tailwind heading into

the next quarters now global markets

exploded

nice big gigantic jump especially over

the last

three month quarter that we had but also

year over year

big gigantic jump here as well net

income

also jumping up quite a bit as well at

least in these global markets so that's

kind of a high level view of bank of

america let's jump over to the stock

chart let's see what's going on

this stock is pulling back nicely today

it's actually down about three percent

so despite the news of a buyback

which i think was probably priced into

the stock a little bit the

news of potentially more dividends more

shareholder friendly stuff

priced into the stock a little bit

we are seeing a little bit of a pullback

here now it obviously is clear that

sellers stepped in here

right at forty dollars almost on the

nose now the stock kind of wicked

through it a little bit

but forty 40 on the nose is seen as kind

of a resistance point on this one we're

sitting right here

at about 38 and call it about 60 cents

on this one i see some logical areas of

pullback

right here at about 30 we'll call that

30 we'll round it up to about 37

but that's not necessarily the number

right on the spot we've got this moving

average that has just

steadily been climbing that will

converge with this area

notice that it was a area support here

this is i'm talking about the 37

level it was an area of support here it

was area of resistance here

and so i like it when two areas like

that converge with another indicator in

this case this moving average here so

when these two touch it should create

some support underneath the stock now if

it doesn't man if it breaks through this

area

i tell you what buyers have completely

dried up this thing could pull back

you know pretty significantly at that

point wouldn't necessarily anticipate

this but we're really only about a

dollar

fifty off of this point and this is

where i could potentially see adding

shares of bank of america now i'm

overweight personally bank of america

whether or not i do it at that level

something i'd have to evaluate if and

when we get to that point but i do like

this stock now

from a longer term perspective look the

trend is up i know we've just looked at

kind of a

a tighter time frame but take a look at

this stock chart holy moly this stock

has been locked in an uptrend

really since the beginning of the year

and we had a low here a

higher low higher low and we're still in

an uptrend here

this is a higher low wouldn't surprise

me

honestly if you have something like this

happen okay where we do find some

support up here

and this one consolidates and then moves

higher now what we're really looking for

for this

trend to continue this is obviously a

really steep

uptrend wouldn't mind seeing it

consolidate sideways but at

some point you're going to have to break

above this 40 level and you're going to

want to see it

on a big green candle you're going to

want to see a green candle above 40 and

maybe follow up the next day with

another green day

then that would signal to me the 40

level is an area of support so if you

were to have a pullback

back to 40 that could create a buying

opportunity as well that's if this stock

reverses and goes

higher not necessarily sure what's going

to happen with

this one but i think the shareholder

friendly stuff that's going to happen

with this buy back

with i mean 25 billion dollars in

buyback is quite a bit we just

ran through their net income in a

quarter and

25 billion dollars is a lot okay and you

know

again more shareholder friendly stuff

like increasing dividends obviously the

federal reserve has kind of

tampered that with all the banks but

bank of america is very well capitalized

and in a very good position my opinion

could you trade bank of america

sure if you want to get in here and

trade this do option stuff

knock yourself out my opinion this is a

buy and hold investment

because you do have this capital

appreciation that does

happen especially when you see interest

rates rise but you also

have just dividend and buyback over a

long period of time

that can be very beneficial to a

shareholder especially so

hopefully you guys enjoyed this one that

was bank of america maybe consider

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