Bank of America Essay

840 WordsMay 22, 20134 Pages
---------------------------------- The Underestimated Potential of Bank of America The US banking industry is on its way to a steady growth as the earnings season demonstrated substantial profits. Specifically, the larger banks have sustained their profitability by emphasizing on expense cuts. A report by Deloitte identifies the outlook for 2013 as ‘the age of re-regulation’. As the regulatory pressures start to take hold, investors are beginning to adjust their stance on the industry. In this current situation, Bank of America (BAC) appears to be a viable opportunity for investors for a number of reasons. Firstly, the financial results have started to improve and the business is geographically well diversified. Moreover, the cheap valuation of the company is provides a stronger upside potential to investor. Industry Analysis Bank of America operates in diversified financial industry, competing against JP Morgan (JPM), Citigroup (C) and Wells Fargo (WF). One major factor that these banks have in common is that they are all projecting a decent recovery in their financial performance as reported in the first quarter reports of FY13. This recovery was brought about by substantial expense cuts and reserve releases. These factors do not project a sustainable source of long term growth but these measures have substantially supported the profitability of banks in difficult periods. The management of larger banks also appears to be confident regarding the improvement in the banking industry outlook. Source: YCharts The above chart represents the change in stock prices of these four big players of the US banking industry in one year. Bank of America has demonstrated highest price appreciation of 66.41% followed by Citigroup whereas the price appreciation of JP Morgan and Wells Fargo has remained limited to approximately 15%. The substantial upward trend is expected

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