Time to buy Bank of America?
Bank of America $Bank of America(BAC.US$ looks even more attractive now with the PE ratio dropping to 8.7 times and the PB ratio at 0.91 times. But before we jump in to buy, let’s take a look if it’s safe to invest in it in the first place!
One of the key metrics in analyzing banks will be looking at Net Charge-Off, which refers to the amount of loans or other debts that a bank has determined it is unable to collect and has written off as a loss.
When a bank lends money, it expects to receive repayments from the borrower, which includes the principal amount plus interest. However, sometimes borrowers are unable to make their loan payments due to financial difficulties or other reasons. When a bank determines that it is unlikely to recover the full amount of the loan, it will "charge off" the loan by removing it from its books as an asset and recording the amount as a loss on its income statement.
By looking at the charts, you can see that BAC has maintained a very low net charge-off since 2008, be it in the commercial, consumer, or even credit card segment. Plus, it has a diversified deposit stream, thus making it a safe bank to invest in this volatile time.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Mister Bull : many strong financial experts have analyse and predicted that there will be a financial crisis with either April to June or July to September period. For me I think I will wait a while more before going into BAC as I have a huge gut feeling that the recession period is approaching soon.