Will Bank Of America Beat Earnings Estimates Next Week?

Bank of America’s BAC stock has been surging, with more than 18% in gains in just the last month. Yet this does not guarantee that Bank of America or other banking companies will report positive earnings reports.

Bank of America is set to report before the open Tuesday, Jan. 19. 

Bear Case: KBW analysts predict that per-share earnings for bank stocks will fall 8% in the fourth quarter compared to the same period last year. Last quarter, the third quarter, saw some of the country’s largest banks, including Bank of America, posting better-than-expected earnings.

This would indicate that even on positive earnings, Bank of America’s stock might struggle to grow at the rate that it has been in recent weeks. 

Some banking executives are scared that rising coronavirus cases could result in loan-loss estimates to rise again as they did earlier in the pandemic. The rates are not expected to reach the same level that they did at the beginning of the COVID-19 pandemic.

Bull Case: One factor that could help Bank of America’s earnings estimates is the fact that mortgage originations have reached an all-time high. Thousands of people have rushed to buy and build homes in more spacious neighborhoods.

In addition to the new homes being purchased, banks have seen a lift from the stimulus bills that Congress passed. 

There is still plenty to like in big American banks. Marketwatch reported that almost half of large U.S. banks are expected to increase quarterly profit.

Benzinga's Take: Even with strong earnings and mortgage numbers, banks will struggle to maintain the growth that they have experienced throughout the market’s recovery from the initial COVID-19 crash.

Photo by Coolcaesar via Wikimedia.