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Bank of America profits set to jump

Could the worst of the regulatory fines be behind Bank of America?

A Bank of America branch
Source: Bloomberg

On Thursday 15 January Bank of America will post its fourth-quarter figures. The adjusted earnings per share are expected to drop from $0.40 down to $0.314, while the company’s sales are called to drift slightly lower from $21.229 billion to $21.128 billion. However, the pre-tax profits for the quarter are expected to jump from $431 million to $5.53 billion.

The company has the support of institutional analysts, with 21 buys, 14 holds and five sells. Between them the average price target for the bank is $18.76, $1.50 higher than the current share price.

The vigor that US and global regulators have pursued banks and financial institutions with over previous indiscretions has seen Bank of America pay a heavy price. Over the last five years the company has had to pay out $70 billion in fines and client repayments. When it comes to banks it is a dangerous game calling the end to the discovery of skeletons in their closets, but in this instance the general perception is that the worst is behind Bank of America.

Out of necessity as much as desire, the bank has embarked upon an extensive cost-cutting exercise and, along with the jump in expected profits, this has helped bring the company back into a more streamline operation.

The current price of Bank of America is up over 10.5% from its opening levels in January 2014. The recent highs in the bank of $18.30 at the tail end of last year are the first hurdle the shares will look to clear. 

Bank of America chart

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