BAC changes
Pick any two versions below to diff them.
- Price
- $51.76 → $50.67(−2.1%)
- Thesis
- The market prices Bank of America at a discount because a large part of its assets are low-yield bonds that it bought when rates were very low, and its returns are still below its own target. At September 30, 2026, it held $496 billion of held-to-maturity securities with an unrealized loss of $104 billion, up from $82 billion at June 30, as rates rose. These bonds earn less than new loans or bonds, so they limit net interest income until they mature. Return on tangible common equity was 12.6% in Q3 2026, or 14.9% without a $1.2 billion anti-money-laundering penalty, below the 16% to 18% medium-term target that the bank set in November 2025. In Q3, adjusted EPS removed: of $1.08 was removed: below added: $1.08 without the removed: expected $1.10, added: penalty, and the shares fell more than 3% before the market opened. For the gap to close, three things must be true. Net interest income must keep growing as old bonds mature and the money goes into higher-yield assets; it grew 8% from a year earlier in Q3 2026. ROTCE must move into the 16% to 18% range in 2027. The consent orders of October 13, 2026, must not bring more penalties or limits on growth. The Q4 2026 report, expected in mid-January 2027, with the outlook for 2027, is the next check. If net interest income keeps growing and returns rise, the gap can close over the next four to six quarters. If rates fall quickly or loan losses rise, it can take longer.