Bank of America (BAC) is the most appealing growth stock among major US banks. Its stock has increased the most among these banks in 2012, and throughout the last year. Bank of America's potential for capital appreciation has increased even more recently since investors' outlook on Europe's crisis is improving, and Bank of America recently made significant strides toward completing its New BAC project. Bank of America is currently absent in the growing housing market, but it's on the way to recovery and improved earnings through its current consolidation and restructuring phase. Bank of America is still available at a significant discount in comparison to its peers. By undergoing the cost savings initiatives in the New BAC project, Bank of America should be financially secure enough to get federal approval for increasing its dividend again in the near future.
Wells Fargo (WFC), JPMorgan Chase (JPM), US Bancorp (USB) and Citigroup (C) are the major US-based banks that are most comparable to Bank of America. Bank of America stock is currently under $10 while all the aforementioned firms range from $30 to $40 per share. Both Bank of America and Citigroup have $98 billion each in market capitalization, USB's is around $64 billion, JPMorgan's is around $155 billion and Wells Fargo's around $184 billion. Bank of America, Citigroup and JPMorgan's prices are all slightly below 10 times earnings; all of their price-to-book ratios are below one. Bank of America's and Citigroup's annualized dividends are around $0.04; Wells Fargo's is $0.88 and JPMorgan's around $1.20.
Citigroup's 1.4 price-to-sales ratio is the lowest; Bank of America's is around 1.6, while USB's is around 4.9. Bank of America's $0.92 EPS is the lowest, JPMorgan's $4.32 EPS is the highest. Wells Fargo's 1.22 debt-to-equity ratio is the lowest; Bank of America's around 2.66 and JPMorgan's 3.68 debt-to-equity ratios are the highest among these firms. Bank of America's 4.6% return on equity, 14% operating margin and 11.6% profit margin are the lowest among all of these banks. USB's 16.4% return on equity, 37.4% operating margin and 26.6% profit margin are the highest among these banks. Bank of America's 3.3% deficit in sales growth over the past five years and 17% sales deficit, YOY, for the past quarter are among the lowest of the major banks.
Bank of America and Citigroup's beta scores are close to two and the highest among these banks; USB's beta score is closest to one. Bank of America's average daily volume is around 135 million shares; its relative volume is currently around 1.1. Both Citigroup and JPMorgan average over 30 million shares but their relative volumes are below 1. Wells Fargo's average daily volume is around 22.3 million shares and its relative volume is close to three. Bank of America stock increased 64% YTD through late September; it increased 17% in the last 6 weeks and 10.9% in the past month. Wells Fargo, USB and Bank of America's stock all had over 40% growth during the past 12 months. Bank of America's stock has increased 13.5% since its last earnings release.
The earnings release Bank of America filed for the end of June 2012 reported its quarterly revenue, net of interest expense totaled $22.2 billion, an increase from $13.48 billion, YOY. Net income totaled $2.46 billion, an increase from an $8.82 billion net loss, YOY. Net interest income decreased to $9.78 billion from $11.4 billion, YOY. Noninterest income increased to $12.4 billion from $1.9 billion, YOY. Declining net interest income was mainly due to lower consumer loan balances and lower declining investment securities yields. Provision for credit losses decreased to $1.7 billion from $3.2 billion, YOY, while other noninterest expenses decreased from $20.6 billion to $17 billion, YOY. These declines were mainly from lower credit costs alongside improved residential portfolio management and declining operating expenses.
Bank of America's CBB division totaled $7.3 billion in second quarter revenue and $1.15 billion in net income, both decreased YOY. Global Banking revenues totaled $4.28 billion and net income totaled $1.4 billion, both decreased, YOY. Declines in the CBB division were due to lower average loans and yields as well as the low interest rates. The Global division declined from lower investment banking fees and lower rates. Bank of America's mortgage banking income increased to $1.65 billion from a $13.1 billion loss, YOY, due to the decrease in the representations and warranties provision. Bank of America cited slowed economic momentum during the second quarter and being downgraded by Moody's; the downgrade didn't have a material impact on Bank of America's financial position.
The preemptive Countrywide acquisition, certainly, set Bank of America behind its competitors. As a result, it had to concede its share in the mortgage loan sector, allowing Wells Fargo to total close to 33% market share. Much of the reason Wells Fargo and JPMorgan have been able to remain the most successful since the financial crash was their timely acquisitions of Wachovia and Washington Mutual, respectively. But, adopting a mode similar to USB and Wells Fargo that is more focused on core functions, non-core divestment and lean operations, is an effective way to improve earnings and market sentiment.
Recent reports indicate that Bank of America will cut 16,000 jobs by December; this would make its workforce smaller than Wells Fargo, Citigroup and JPMorgan, as well. Bank of America's goal is to reduce the workforce from around 290,000 to around 260,000 by 2013. The New BAC project is aiming to improve its global investment portfolio from Merrill Lynch, mitigate risks and realize $8 billion in annual savings by 2015. Many analysts feel this latest move was a reaction to being behind schedule or to be more aggressive in the pursuit to improve earnings in the near term. Bank of America already closed 157 branches net in the US, sold 46 non-core assets since February 2010, and cut 23% of its junior investment bankers.
As of the second quarter, cost savings from the New BAC project were running at $970 million, $1 billion was the goal for 2012. The first phase of the project was to reach $5 billion in annual savings before 2014 and another $3 billion by mid-2015. If Bank of America is able to report growth in earnings or cost reductions from these recently announced cuts and investors' sentiment about Europe continues to improve, Bank of America's price should continue to increase during 2012 and beyond.