Simultaneously, net charge-offs on bad loans fell from $1.1 billion to only $934 million year-over-year, while the provision for future credit losses fell from $997 million to $835 million.
All banks end up making loans that eventually go bad; that’s just the cost of doing business. Those costs swelled after 2008’s marketwide subprime loan impasse, and just when it appeared heavy loan losses were in the past, an implosion in crude oil prices meant many of BofA’s loans to the energy sector also soured. BAC is starting to see daybreak on that front too, however.
That said, Q1’s charge-offs and loss provisions were up slightly from Q4’s totals, though the rise can be attributive to seasonality.
Most compelling of all: The company gave $2.3 billion back to BAC shareholders in the form of stock buybacks, in addition to the $800 million it paid in dividends. Bank of America stock currently yields 1.34%, most recently paying 7.5 cents per share at the beginning of March. All told, BofA gave 70% of last quarter’s income back to its investors.
Bottom Line on BAC Stock
Bank of America didn’t provide updated guidance for Q2 or for the full year in its presentation, though the matter may come up during the earnings call (scheduled for 8:30 a.m. Tuesday).
As of the latest look, though, analysts expect BofA to report a profit of 46 cents per share on $22.16 billion for the quarter currently underway. Both would be well up from year-ago levels. On a full-year basis, the market is looking for a profit of $1.75 per share on revenue of $88.44 billion. Those figures are up 16.6% and 4.5%, respectively, on a year-over-year basis.
I wouldn’t be surprised to see those estimates revised upward in light of the Q1 report.
By that same token, don’t be surprised if analysts start upgrading BAC stock from their current consensus opinion of slightly less than a mere “buy” (with the top score being a “strong buy.”) The analyst community tends to be bullishly biased, so anything less than a full buy rating suggests Bank of America isn’t getting the respect its first -quarter results say is merited.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.