bank

Bank of America (BAC) Stock Analysis - NEW Buyback! Time To Buy BAC Now??

what is going on investors time to talk

about bank of america corporation

ticker symbol a bac they reported

earnings this morning

we'll get into those in just a second

we'll also take a look at the stock

chart

take a look it's on a key level here

we'll see about that now they did make

some news outside of earnings

they declared an 18 cent dividend which

is in line with the previous

maybe that's why the stock is selling

off a little bit 1.5 percent

maybe investors wanted a little bit more

there now they did

announce this buyback through march 31st

2021 which is a really short time frame

2.9 billion dollar authorized uh buyback

of the common stocks so that's kind of

nice

and a little bit extra for share based

compensation so if you're not sure about

these buybacks

i mean part of it is to manipulate the

eps

but some of it too is the executives get

paid with shares of bank of america and

what do they want to do when they get

the shares they want to sell it in to

the buy-back so they can buy a new rolex

or a new ferrari

so they authorized a little bit of that

as well but this is a very short time

frame on this

of this buyback so you only get about

two months to execute a 2.9 billion now

they don't have to execute it they don't

have to execute it at all but it is

authorized by the board so we'll see

what happens there that could create

some buying opportunities uh for the

stock

bank of america's q4 showed

stabilitizing and

loan demand and strong markets what i

thought was interesting is deposits

rose 1.7 trillion year over

year loan deposit or loans basically

loan demand was basically flat

when we jump over the earnings we'll see

evidence of that

but you know deposits are way up so it

kind of gives you a tale of two

economies you know

you have some people out there that are

definitely struggling still going to

make rent things like that

they're on unemployment but then there's

a fair amount of consumers out there

that have more deposits in their bank

year over year because people are just

saving their money so we'll see what

happens there

now from a financial perspective from a

valuation perspective bank of america

is coming in actually a little hot okay

right now the i always take a look at

banks i compare them to themselves if

you've been following this channel

that's typically what i do

and we take a look at price to tangible

book when we look at a bank because if

you liquidate

the bank's assets you basically get a

tangible book value

and any premium you pay over that is the

price to tangible book and we're

sitting at a 1.62 a price to tangible

book and you see

anytime we've getting up into this 1.75

this is a five year chart here

anytime we've approached that level

which we are approaching now on bank of

america

the stock or at least the price to

tangible book has corrected so we'll see

if that's the case

i don't necessarily see this pushing out

i don't necessarily see the momentum

unless you get interest rate momentum

which i just don't necessarily think

we're going to see here in the in the

next 12 months

unless you get that i think it's going

to be tough to push this up

over the 1.75 tangible book again this

is just a piece of the pie if you want

to add to your shares of bank of america

you got to factor in the buyback the

dividend your holding period

and the stock chart and the and the

fundamentals which we'll talk about here

in a second this is just one small piece

but it is in my opinion uh

not a buy signal uh from that sense so

moving over to the financials so

we've got year ended here so we can see

here but we've also got the fourth

quarter this is the most recent period

here

we've got the third quarter so quarter

over quarter and then year over year you

go back a year here so

we'll take a look at total revenues here

we'll just look at it just broadly here

we went from 91 down to 85. so we lost

about

that's about 6 billion off our total

revenues we see quarter over quarter

were essentially flat year over year

we're down about 10

so still recovering i would say at bank

of america but they've done a nice job

here now

take a look at our expenses here these

are you know these are all our expenses

for running the bank it's a big bank

keeping in mind for year over year we

we've shed off about we'll call it about

5.5 billion

in revenue but our expenses actually

went up just marginally okay that's

essentially flat we went from 55 to 55.2

now quarter over quarter we're down year

over year we're flat so the

bank of america is doing a nice job

keeping expenses uh essentially in line

so

i'm moving down into our income so we

made take a look how badly this got

hammered so

we made income we got 32 billion dollars

in operating income before taxes last

year this year

19 billion way down how come it's way

down it's because of these provision for

credit losses right here so we've talked

about this on the show

when we've talked about the banks is

they bolstered up their credit

losses this is money that they set aside

it's not money that goes out the door

it's money that is set aside

for what the bank believes is coming

credit losses

you know people defaulting on credit

cards car loans

auto loans whatever it might be they're

they're anticipating a larger demand

of credit losses and we see here we went

from 3.5 billion all the way up to 11.3

so they set aside

like over three times almost four times

more money

for credit losses in 2020 than they did

2019

but the trend is reversing we see here

in the third quarter they set up side

about 1.39

went all the way down to 53 million

that's way less okay it's even less than

the fourth quarter of 2019

where we were sitting at 9 41. so

they've pulled that

back the algorithms the computer

programs that they have to calculate

this stuff

is pulling this back now we didn't see

them add this back in i think jp morgan

actually added that back in

so it did impact our income before taxes

down here so

because that comes in on as an expense

again this money is not flowing in it

could be potentially added back at a

future date

but just keep that in mind we came in in

the quarter 6.1 that's over the previous

quarter where we earned 4.5

but it's down year over year where we

made 8.1 so again

recovering still but we'll see what

happens with this

you know credit losses they still have a

fair amount of that sitting on the

balance sheet we'll see if they have to

use that or if they can add that back in

now

we've got our average common shares

again expect this to go down if they

execute on that buyback

expect that to go down you know very

nicely at some point now return on

average assets 0.78

okay typically bank of america runs in

this

one you know one and you know 1.15

we see here last year they're at 1.13 in

the

in the full year for 2019 they were

1.414

we're all the way down at 0.67 percent

so they're running at a really low

margin here

on their return on assets expect that to

tick up at some point obviously if you

get interest rates to tick up

which i don't know if anybody's

necessarily predicting it anytime

soon but if that does happen expect that

to tick up nicely now we're at a

critical level in terms of this stock

price okay

we see here we drew this trend line it

was kind of a line in the sand here

just you know just barely but it is

proven over the last couple trading days

i'm actually on a weekly chart so this

is actually over the last couple weeks

above the stock is just trouble getting

above 33. now can the buyback propel

this

above 33 that is possible we'll see what

happens if they were able to execute

that

very well and there's not a lot of

selling into the buyback yes

and any peak up over 33 on on a fairly

significant momentum and volume could

project us all the way back up to these

highs

that you know before the virus and

things like that up at 35

and the momentum and depending on how

strong that move is

could get us above that so that's one

scenario that could happen at this level

the other scenario is

that just sellers step in all these

sellers back here they've kind of had

their money trapped in bank of america

for a while they want to get out

and as soon as this stock peaks up here

they step in and sell

and so uh that's possible too this stock

could come back

down here and reverse lower levels into

the 30

range i'd say 10 percent lower to where

we're at now a little bit closer to

where this moving average is which is 28

29

anywhere pull back into that range in my

opinion would set up somewhat of a

buying opportunity for bank of america

a very bearish situation is you have

this gap here and the stock comes back

all the way down here and fills this gap

you'd see very significant support for

this at 23 but you'd have to have a

market reversal

in this one you'd have to have things

really really get bad and chances are

you'd look

through your whole portfolio and

everything would be getting hammered and

you might not want to

step in and get bank of america you

might have like 10 other stocks that

you'd want to get into

at that point but in the shorter term

this one's kind of teetering on an edge

it either wants to poke through here

the momentum obviously is indicating

that the stock is on a really strong

uptrend here we'll see if it's able to

break through and break

through all the sellers that have

stepped in up here and push through

these highs if not it'll get rejected i

think it could create a buying

opportunity

if you're bullish banks if you're

bullish the economy

especially the united states economy and

eventually interest rates i don't

necessarily think you have to be bullish

interest rates to jump on a bank stock

but that would definitely help so that

was bank of america hopefully you guys

are doing well out there we'll be back

with

more earnings this week got netflix got

some exciting ones coming

at you this week hang in there hopefully

you guys have a great week