Hi YXI friends,

Bank of America has wrapped up 2024 with a very strong Q4 performance, exceeding my previous expectations. If its business growth sustains under a favourable Trump administration, the stock could see double digit price appreciation in 2025.

In this article, I will go through the latest earnings report in great detail, with an assessment on BAC’s valuation and price technicals. Spoiler alert - I am turning more bullish and upgrading my outlook of BAC.

Table of Contents

• 1. Growth Accelerated Quickly

• 2. Profitability Margins

• 3. Business Segment Performance

• 4. Valuation Is Justifiable

• 5. Technical analysis

• 6. Rating: Equal Weight (Upgrade)

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Growth Accelerated Quickly

Net Interest Income (NII)

Net Interest Income rebounded into the positive growth territory in Q4. The $14.4 billion of NII is up 3% both YoY and QoQ.

This positive growth was primarily driven by higher deposits and loan balances, while benefiting from fixed-rate asset repricing. The net interest yield was stable in the quarter. The NII recovery should provide a strong base for BAC heading into 2025.

Non Interest Income

Non Interest Income spiked 37% YoY to $11 billion. Investment banking and asset management fees were big contributors, alongside strong sales and trading revenue.

Credit Loss Provisions

Credit loss provisions came in at $1.5 billion, up 32% YoY but declined from Q3.

Quarterly Revenue (Net Interest Income + Non Interest Income)

BAC’s Q4 revenue grew 15% YoY to $25.3 billion, a big acceleration from the flat growth seen in the past two quarters. Seasonally Q4 is weaker compared with Q1-Q3. The acceleration is thanks to the record Q4 non interest income of $11 billion, which is 37% higher than a year ago.

Finally, the TTM Revenue (i.e. the revenue for the entire 2024) came in at $101.9 billion, a 3.4% increase from 2023.

During the earnings call, BAC’s management highlighted that consumer spending grew 4-5% YoY in the first two weeks of January while business clients continue to show profitability. The key takeaway is that the US is nowhere near a recession yet, despite the recent yield curve inversion / reversion.

2. Profitability Margins

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