Earnings season: Bank of America

Bank of America, daily

This opening week for the earnings season will be focused on the finance sector and banks are shown with rather optimistic perspectives in the media with various reports scheduled by S&P 500 companies for the remainder of this week. For Zacks, the major bank industry, which accounts for approximately 45% of the financial sector’s total earnings, an increase in earnings of +11.2% is expected with +2.5% more revenue than in the last period. This would follow an earnings growth of +298.1% on revenue -2.1% lower in the prior period. For the financial sector as a whole, total earnings are expected to increase 19.9% versus a revenue increase of 4.9%.

Bank of America ( #BankofAmerica or BOA ) is an American multinational investment bank and financial services company, in addition to being the second largest banking institution in the United States after JPMorgan Chase. It serves approximately 10.73% of all US bank deposits, being the thirteenth largest company in the world by market capitalization with $368.4B. This large bank releases its Q3 earnings results and has an investor presentation today (Thursday, October 14) before the New York markets open.

The BAC mentioned in its latest reports that credit and debit spending experienced a 28% increase in the retail segments year-on-year, sharing the same data in food spending, while travel spending increased more than 220%. On the other hand, the number of mobile banking clients increased by 3%, reaching 40.5 million.

As shown in the following graph, the BOA has had an annual performance of 47.7% during this current year.

Annual performance of BAC, JPM, MSFT, SP500 Source: Zacks Investment Research

Seeking Alpha, estimates an EPS of $0.70  (with a minimum of $0.63 and a maximum of $0.79 in the estimate) with a difference of +$0.19 compared to Q3 2020 of $0.51 which means a year-on-year growth of 37.06%. An increase in estimated revenue is expected at  $21.60B with a difference of +$0.13B compared to current July revenue.

The BAC is in Rank #3 being a #HOLD from Zacks, which predicted EPS of $0.71 with a 0.69% probability of having a surprise positive EPS as it has done previously with an average rate of 16.9%.

The market is currently looking for evidence that loan growth has finally arrived. Net interest margin rose in the third quarter due to higher Treasury yields in September. The growth of branches, the improvement in digital and online banking, along with the success of Zelle (a convenient way to send and receive money from people you trust or to virtually anyone with an eligible bank account in the US using their address, email or mobile number), in addition to the increase of 2,200 ATMs to the network, have all allowed cross-selling of products, including mortgages, auto loans and credit cards, and will continue to support profitability.

1D technical analysis

BAC has been in a bullish rally since the end of 2020. It is currently above its psychological level of 40, marking a maximum a few days ago at 44.75 without reaching the psychological level of 45, and currently the price is at 43.13, a price that we haven’t seen since 2008.

The price maintains a support at the level of 43.13, which to break down would be considered a false breakout of this resistance level. The closest support is the 21-period SMA 1D at 41.50; below this at the psychological level of 40, the next key support would be the range that goes from the psychological level of 35.00 to 36.80 and from there to the psychological level of 30. The resistances are currently at the maximums left at 44.52 to the psychological level of 45.00, and from there it would be maintain the psychological level and reach the highs of years ago at 52.94.

The ADX is at 21.93 with a +DI at 21.59 making a cross with the -DI at 28.20, however, the ADX is at 30 with a downward bias which would indicate a reversal if it fails to maintain a price above 43 and the psychological level of 40.