Question

• Briefly describe how you will evaluate Bank of America performance
• How is Bank of America doing financially? How do you know?
• Which financial statement do you think provides the best information for investors?

Answer 1

Here is the information I have generated to evaluate the Bank of America performance:

• The Bank of America is one of the biggest US banks & the market plunging $130 billion due to the current COVID scenario has sent the entire stock & economy on a downward track.
• It is having the biggest threat to the consumer banking business & financial health of millions is dependent on the same.
• The biggest challenge for BOA is that any increase in unemployment & also the fact that consumer & business defaults can lead to massive losses.
• The overall $22.8 billion in revenue has remained flat but the overall 4.8 billion USD had made investors shake their confidence.

The overall investor sentiment depends on the earnings of the bank & all major financial banks and institutes taking bigger credit provisions has made the industry turn negative.

How is Bank of America doing financially:

• The BOI has shown a 43% decline in EPS for Q1 of 2020 which has been quite bigger than what the market was expecting.
• A cumulative loss is $3.6 billion increase in overall reserves due to the current COVID - 10 crisis which the work is facing.
• The overall BACs net interest margin has shown a steep decline
• The stock has fallen in the 6-7% range in the past few weeks. The overall stock has shown a total return of -21.3% over the last 12 months.
• EPS has shown a 46% down to .40$ which is much lower than the overall analyst expectations.
• The overall profit decline has seen a $3.6 billion increase in reserves which was done to ensure that loan losses are covered up.

How do I know -

Sources:

• Investopedia
• Bank Of America Financial statements
• The Motley food financial analysis

The financial statement that provides the best information for investors:

• The important aspect is to know - the net interest margin. Its an indicator of the bank's ability to lend money at higher rates than paid for deposits.
• Banks make the overall profit by charging interest rates on loans which are higher than the interest rate they pay for deposits. Higher margins show more profitability.

Overall:

The bank even though has seen a sharp decline in stock value has been able to show financial strength by hiring 2000 employees and sharing that lay off won't happen.

Several business categories and lines have shown to be performing better than the current situation. The thriving small business lending operation will benefit from the stimulus and support given by the government and the same is visible as many application has been received for financing.

The bank is well set up with a lot of mortgages that could generate fees from activities that involve refinancing and they also have a larger online brokerage and wealth management dividing which can generate good activity flow.

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