Bank Of America: This Time Will Be Different, Seriously

Apr. 23, 2020 2:10 PM ETBank of America Corporation (BAC)71 Comments
WG Investment Research profile picture
WG Investment Research


  • Bank of America's stock has significantly underperformed the broader market so far in 2020.
  • The bank recently reported Q1 2020 results and, as expected, earnings were under pressure due to the impact that COVID-19 has had on the economy.
  • In a broader context, many experts believe that we are already in a recession, which will likely have a negative impact on the bank's stock in the near term.
  • However, I believe that it will be a different story for Bank of America this time around - the bank is better positioned today than it was before the last recession (i.e., the global financial crisis of 2008/2009).
  • I'm long Bank of America, and I have no plans to reduce my overweight position in the near future.

Bank of America's (NYSE:BAC) stock has significantly underperformed the broader market so far in 2020.

ChartData by YCharts

However, it should be noted that BofA shareholders are not the only ones that have had to deal with the pain of a falling stock price.

Source: Ziegler Capital Management

The COVID-19 related concerns, in addition to the deteriorating interest rate environment, has wrecked serious havoc in the financial sector. I believe that the stock market will face further downward pressure as more companies report on the financial impact of the COVID-19 spread but, in my opinion, BofA is well-positioned to weather the storm. As such, I believe that BofA's stock at current levels will turn out to be a great long-term buying opportunity.

The Latest

On April 15, 2020, BofA reported Q1 2020 results that missed on the bottom-line but that beat the consensus top-line estimate. The bank reported Q1 2020 EPS of $0.40 (missed by $0.14) on revenue of $22.8B (beat by $190mm), which does not compare favorably to the year-ago quarter.

Source: Q1 2020 Earnings Slides

The low interest rate environment continues to come into play but the highlight from the quarter was the sharp decline in net income/EPS. But earnings being under pressure should have surprised no one given the economic impact that we've already seen from COVID-19. As a direct result, BofA materially built its reserves to deal with the potential fallout - the bank increased its allowance by almost $7B (yes, billion), or 67%, from the prior period.

Source: Q1 2020 Earnings Slides

Make no mistake about it, BofA is not the only bank that expects significant losses due to the current health scare. The big six financial institutions - BofA, JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (

ChartData by YCharts

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long BAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (71)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.