Bank of America is a U.S. financial institution serving consumers, businesses, corporations, and institutional investors through four segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets. [S3][S7]
Sources through 2026-09-15 · Report dated 2026-09-15
Business details
How it makes money
Revenue comes from net interest income on loans and deposits (~$60B in 2025) and noninterest income from asset management fees, investment banking fees, sales and trading, card interchange, and service charges. [S1][S9]
What drives results
Net interest income: driven by loan and deposit growth, fixed-rate asset repricing, and deposit costs. Q2 2026 NII was $16.0B, up 9% YoY. [S2][S17]
Credit quality: net charge-offs were 48bps in Q2 2026. A rise in charge-offs directly reduces pre-tax income. [S2][S18]
Efficiency ratio: 59% in Q2 2026, improving from 63% a year earlier. Management targets 55-59% medium term. [S2][S6]
Key dependencies
Federal Reserve interest rate policy and yield curve shape directly affect net interest income. [S17][S24]
Deposit franchise stability: a $2.0T average deposit base provides low-cost funding. Deposit flight would raise funding costs. [S7]
Whether Bank of America's net interest income repricing tailwind persists through 2028 or fades as fixed-rate assets roll off and deposit competition returns.
BAC earns net interest income from loans and deposits and fees from wealth management, investment banking, sales and trading, and card services. Four segments diversify revenue but all depend on the deposit franchise and credit discipline.
At $59.65, the market prices roughly 13% ROTCE, 4-5% revenue growth, stable credit costs, and no multiple re-rating. That is below management's 16-18% ROTCE target.
BAC is a solid but not superior bank. Base-case intrinsic value near $66 assumes mid-single-digit NII growth, contained credit costs, and efficiency improvement. At $59.65, expected returns are modest and the margin of safety is thin.
Net interest income growth. Q2 2026 NII rose 9% YoY on loan growth and fixed-rate asset repricing. A 200bps change in NII growth moves intrinsic value by roughly $2 per share.
Net charge-offs. At 48bps in Q2 2026, credit costs are low. A 20bps rise cuts annual pre-tax income by roughly $2.4B and intrinsic value by about $2.50 per share.
Present-value estimates at the analysis date; base-case DCF and earnings-power value assume a five-year forecast horizon to 2031, a WACC of 8.5%, terminal growth of 3.0%, and a 20% tax rate.
Scenarios are conditional estimates, not promised returns.
Bear · USD 43.0000
Recession raises charge-offs above 120bps, loan growth turns negative, and NII stalls. EPS falls to about $3.20 and shares trade near 1.0x book.
The specific dollar amount and timing of BAC's fixed-rate asset repricing tailwind is not disclosed in granular form. The analysis assumes it supports NII growth through 2028 based on management commentary but cannot independently verify the remaining magnitude. Competitor ROTCE figures are approximations from public filings.