2 Wall Street Analysts On Bank Of America
The bank reported Q1 2015 EPS of $0.27 versus consensus of $0.29 with revenues of $21.4 billion, slightly below consensus of $21.6 billion. Estimize users expected earnings of $0.30 per share and revenue of $21.58 billion.
Morgan Stanley analyst Betsy L. Grasek noted that the company had driven down core expenses and legacy asset costs, however, “investors want to see more.”
Grasek felt that further cuts to expenses could from lowered compensation. The bank’s “compensation expenses to revenue ratio is highest among both money centers and super-regionals (BAC's 2014 ratio was 40 percent vs. median 34 percent at peers) and we believe they have room to bring this down, especially in a low revenue environment.”
The analyst expected that automation and branch consolidation along with reduced employee compensation “should drive BAC's core expense ratio down from 60 percent in 2014 to 59 percent in 2015 and 57 percent in 2016.”
Morgan Stanley maintained an Overweight rating and $20 price target on the stock.
At Barclays, Analyst Jason M. Goldberg noted that “net interest income and fee income both appeared modestly below consensus,” while the bank’s loan loss provision increased.
Goldberg highlighted that parallel run exit may cost the bank 100bps, above the Barclay’s expectation of 75bps, and incremental CCAR costs were expected to be $100 million 2015.
The above factors weighed on the stock, according to Goldberg, however, the analyst expected results to improve in Q2 of 2015. Despite the anticipated improvement, the bank’s 1 percent ROA goal “may not be achieved in 2016.”
Barclays maintained an Equal Weight rating and lowered its price target from $20 to $19.
Bank of America recently traded at $15.92, up 1.8 percent.
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