Bank of America Corporation (NYSE:BAC) was one of the major banks to benefit from a sector-wide upgrade by Goldman Sachs (NYSE:GS) last week. Goldman Sachs argues that banks “will deliver market-leading earnings growth” in each of the next two years and likely raise dividends soon, according to Investor’s Business Daily. Here then are three more reasons to take another look at BAC:
1) BAC’s stock has gotten beaten down by negative news including speculation that it will be the rogue bank named in an upcoming document dump by WikiLeaks. According to its most recent quarterly report, BAC has a net worth of $230 billion and a market cap of just $119 billion. After falling some 12 percent over the past three months, the stock is truly starting to look like a value play, even with the specter of negative press having over its head.
2) Federal Reserve chairman Ben Bernanke comments over the weekend on a widely-watched 60 Minutes interview showed that the Fed is not opposed to the idea of a QEIII or QEIV. Bernanke argues that fears over inflation are overblown, and he’s signaling that the money-printing spigot isn’t going to be shut off anytime soon. It’s hard for banks NOT to make money in that environment. Negative press doesn’t much matter if Bank of America is making hoards of cash.
3) One of these days, in theory, BAC’s ill-fated purchase of Countrywide Financial for $4 billion just might pay off. Losses are still mounting on the deal, but the bank is trying to meet them head-on by assigning some 20,000 employees to its loan modification division. If they can start generating income from Countrywide loans, they’ll be in a much better position. The controversial move vaulted Bank of America from sixth place to No. 1 in mortgage originations in U.S. They’re a mega bank, and one of these days, the company’s earnings will reflect that.