Bank of America Corp (NASDAQ: BAC) and all other large banks have been fighting to move up higher. It happens regardless of the fact that firms reporting pretty big earnings just a several weeks ago. For instance, the Bank of America case shows the company beat on revenue estimates and earnings per share. Still, BAC stock moved down.
Due to recent stock market problems and concerns over a possible inflection between long and short-term shares, retail investors sold the banks regardless of the high income. That was not only Bank of America shares too. Stock owners and investors were returning Goldman Sachs Group Inc (NASDAQ: GS), JPMorgan Chase & Co (NASDAQ: JPM), Citigroup Inc (NASDAQ: C), and Morgan Stanely (NASDAQ: MS) back on the shelf also.
Still, with the jump in stock markets during the last few days, some retail investors would have believed those stocks would be growing, not falling. The bad price action could determinate higher, especially in the circumstances of BAC stock.
The Federal Reserve did not set up higher interest rates in the most recent meeting, but it does not mean higher rates are not arriving soon. It might be three or four jumps this year and that does not change the situation significantly. In fact, the trend is the most important factor when it comes to these FED interest rates.
Banks are adopting the higher interest rates because they earn a larger sum of money on client’s deposits without transferring to them. As the result, the banks are receiving a hike to their interest margins, and it means their profit is going to be bigger. All this usually happens without more risk.
Secondly, higher volatility brings more benefit for Bank of America too. Such volatility might make it more problematic to poses its stock, but on the other hand, it does make a difference for the trading revenues. In fact, it was a big load for many banks in 2017. Fortunately, the volatility is very low this year, so that problem is going to disappear totally. Besides, with the blast of the short volatility and long equities trade collapsing hundreds of portfolios and few ETNs, it is quite safe to prognosis it is going to stay a more volatile year.
Volatility and higher rates will not matter if Bank of America’s underlying job is moving slowly. Fortunately, it is not the scenario here. The finance expert at Goldman Sach lately stated 2018 is going to be a good year and no recession is possible during that period, while the further economic expansion brings benefit for investment banks.
Some experts believed Bank of America income might expand almost 40 percent this year with a new growth of 13 percent next year. Still, revenue predictions just call for 4.3 percent growth this year and 4.8 percent next year. And that potential rise sounds quite impressive.
Despite the fact that it does not make too much sense that earnings growth is going to be almost 40 percent while the revenue just a little above 4 percent, it is what financial analysis declared.