Is Bank of America Stock a Buy, Sell, or Hold After Q2 Earnings?
One of the world's largest financial institutions, Bank of America (BAC) stepped into the spotlight with second-quarter earnings that beat on profit but missed on revenue, evidently one among many major U.S. banks weighed down by softer-than-expected net interest income (NII). Despite loan and deposit growth, lower interest rates have clipped some of the gains. CEO Brian Moynihan remains upbeat, pointing to four-straight quarters of NII gains. Still, the Street seems unconvinced.
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Investors are left to decode whether the underwhelming revenue is a speed bump or an early warning sign. With economic winds shifting and market momentum in flux, is BAC stock a wise portfolio addition, a chance for investors to lock in gains, or a hold for the patient investor?
About Bank of America Stock
Based in Charlotte, North Carolina, Bank of America is a financial giant offering banking, lending, and investment services to individuals, businesses, and institutions. With global reach and digital strength, BofA stands as a key player in the evolving world of finance. Its market capitalization currently stands at $356 billion.
BAC stock has had its share of quiet spells, returning just 10% over the past 52 weeks. But the tide has turned sharply in recent months. Up more than 26% in just three months, BAC hit a 52-week peak of $49.31 on July 3. Soon after came the Q2 earnings, and the stock dipped slightly. But investors didn't flinch for long. Just a session later, on July 17, BAC rebounded over 2%, regaining momentum and positioning itself for a potential breakout back toward recent peaks.
BofA has quietly built a reputation as a capital-return machine. The company has been a reliable dividend payer for over three decades. For 12 straight years, it has raised the payout. Most recently, BofA announced an 8% hike to $0.28 per share starting Q3 2025, pushing its annualized yield to 2.38%, well above the S&P 500's (($SPX) 1.14% yield. But dividends are just part of the story.
In August 2024, BofA authorized a fresh $25 billion share repurchase program. This dual strategy of rising payouts and aggressive repurchases signals a sharp focus on shareholder value, without compromising its strong capital base or long-term growth ambitions.
A Closer Look at Bank of America's Q2 Earnings Results
BofA rolled out its Q2 2025 earnings report on July 16 with a performance that balanced resilience against a few underwhelming beats. EPS rose 7.2% year-over-year (YOY) to $0.89, edging past the $0.86 consensus. Revenue, despite growing 4.3% YOY to $26.5 billion, came in below Street expectations. The top line was weighed down by a softer net interest income (NII) print of $14.82 billion, which came in $70 million short of forecasts. NII, the backbone of the bank's core lending business, benefited from fixed-rate asset repricing and steady deposit and loan growth, but lower interest rates blunted the upside.
Still, it wasn't all softness. Trading remained a bright spot, with sales and trading revenue jumping 14% to $5.3 billion, logging its 13th-straight quarter of segment revenue growth. Fixed-income and equity trading grew 19% and 10%, respectively. However, investment banking fees dropped 9%, dragged by declines in underwriting and advisory revenues. On the credit front, provisions rose 6% to $1.6 billion, while net charge-offs dipped slightly.
Capital buffers stayed robust, with the Common Equity Tier 1 (CET1) ratio steady at 13%. However, profitability efficiency slipped slightly, as the efficiency ratio rose to 64.58% from 63.86% a year ago — a move that typically signals growing operational pressure.
The balance sheet remained solid, with average deposits growing 3% to $1.97 trillion, the eighth-straight quarter of sequential growth. Meanwhile, loans rose 7%, and average global liquidity sources reached $938 billion. Plus, BofA returned $7.3 billion to shareholders — 2 billion through dividends and $5.3 billion in share repurchases – reinforcing capital strength amid uneven revenue traction.
Despite a record NII on a fully taxable-equivalent basis, the bank's elevated efficiency ratio and revenue miss left investors weighing growth potential against looming macro uncertainties.
Looking ahead, BofA's management remains upbeat. CEO Brian Moynihan sees artificial intelligence (AI) as a game-changer, streamlining operations beyond anything previous tools allowed. The bank expects Q4 NII to be between $15.5 billion and $15.7 billion. CFO Alastair Borthwick echoed the focus on capital efficiency, pledging to pull every lever to keep spending tight and returns strong.
Analysts tracking BofA anticipate the 2025 bottom line to grow about 12% YOY to $3.67 per share, then rise another 16% to $4.27 per share in fiscal 2026.
What Do Analysts Expect for Bank of America Stock?
Following the quarterly results, Oppenheimer analyst Chris Kotowski trimmed BAC stock's price target to $55 from $57, maintaining an 'Outperform' rating. The quarter, while directionally on track, slightly missed the mark — pretax figures came in a bit light, but a favorable tax rate helped soften the blow.
Despite the soft spots, Wall Street remains bullish. BAC still holds a 'Strong Buy' consensus, keeping its status as a steady favorite in the financials space. Out of 25 analysts with coverage, 17 suggest a 'Strong Buy" rating, five advise a 'Moderate Buy,' and three have a 'Hold' rating.
The average analyst price target of $52.64 indicates potential upside of about 11% from current price levels. For the bold bulls, the Street-high target of $59 suggests that BAC could rally as much as 25% from here.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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