Bank Of America Upside Possible If Net Interest Income Rise

One of the thing to watch out is the way expectations of higher-for-longer interest rates, how this would impact Bank of America when the bank reports first-quarter earnings.

All lenders are exposed to the direction of rates, which touch virtually every aspect of their activities. Bank of America is particularly sensitive to rate fluctuations, partly because it has a larger customer deposit base than other large U.S. banks. That means the bank benefits from clients' higher interest payments, but also must pay out more for customer deposits.

Market is expecting Bank Of America net interest income (NII) to drop to $13.8 billion from $14.6 billion a year ago,

I would be more interested to see how Bank Of America have been trading before its earnings and how investors perceive its stock price movement.

We can see that investors buying strength is strong and with GS having profit from the recovery in debt making, we might see the same revenue earnings increase for BAC.

Though net income for BAC is expected to fall, but the forecast might not be accurate, we will have to see the overall picture whether the net interest margins bottoming, and Bank Of America is hitting the inflection point).

Bank of America's credit card metrics normalized in March as both its delinquency and net charge-off rates increased and remained below their pre-pandemic marks. The BA Master Credit Card Trust II delinquency rate of 1.41% edged up from 1.39% in February and trailed the pre-pandemic March 2019 level of 1.67%. Its net charge-off rate jumped to 2.46% from 2.05% in the previous month and stayed under 2.82% from five years ago, the bank disclosed in an SEC filing. Credit card lending activity retreated as receivables outstanding of $15.9B at March 31 fell from $16.1B at Feb. 29. From a year ago, though, lending increased 12.8%.

We could see that technical is showing a pullback, if we looked at the last few days of downwards trend, investors are still buying up BAC, even with MACD dipping downwards.

What could be interesting would be how credit could remain a swing factor, BAC might not suffer from delinquency rate so greatly.

The options market overestimated BAC stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±4.0% on average vs an average of the actual earnings moves of 2.5% (in absolute terms).

The option valuation is overvalued and we could expect price volatility of upside if BAC could show recovery in its credit card delinquency rate. What could be key is the net income.

Bank of America would be interesting to watch as last week, we saw some banks suffer downside, but GS change the trend, it went up more than 2.5% after its earnings. So what is the key contribution?

Noninterest revenues should be a relative bright spot. Investment banking revenues should see strong gains, and while M&A results will remain the weak link, the quarter saw an uptick in announced transactions.

Appreciate if you could share your thoughts in the comment section whether you think Bank of America would beat the net income interest estimate and and upside can be seen post earnings.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.