Bank of America (BoA) will announce its earnings for Q1 2022 today (18th April) before market open. Last week, the performance of US bank stocks was mixed, with Goldman Sachs, Morgan Stanley and Citigroup all beating consensus estimates, while Wells Fargo reported lower revenue than expected following a fall in home lending and poor trading results despite high trading volumes.
Fig 1：（BoA) Quarterly Reported Sales and Earnings per Share：CNN Business
Market outlook for the upcoming announcement remains mixed. Sales revenue is expected to increase by 4.52% from the previous quarter (or up 0.87% from a year ago), to $23.1B. On the other hand, consensus estimates for EPS stands at $0.75, down –8.54% (q/q) and –12.79% (y/y) respectively. A fall in the company’s EPS would also mark its first decline since the final quarter of FY 2020.
In general, an interest rate hike by the Fed may benefit the banks, which could see net interest margin and net interest income increase, thus expanding overall revenue growth. In the previous quarter, BoA pointed out that for every 100 bp increase in interest rate, its net interest income and full-year EPS will increase by roughly $6.5B and $0.80 respectively.
In addition, BoA has one of the largest retail branch networks and is ranked among the top four US credit card issuers. It is also one of the top banks in terms of small business lending, retail mortgages and home equity lines of credit. This serves as a competitive advantage for BoA among its peers.
Nevertheless, geopolitical risk is a downside factor that cannot be ignored. The Russia-Ukraine conflict and the associated sanctions may further disrupt global supply chains, and the economy may risk being tipped into recession during rate hiking by central banks. An inversion of the yield curve may provide a leading indication of recession (currently the US 2-year rate is at 2.46% while the 10-year rate is at 2.83%).
Technical Overview:
The Weekly chart shows a head and shoulder price pattern, in which #BankofAmerica is currently testing the neckline at $37.80. The company’s share price remains attached to the lower Bollinger Band, indicating ongoing downward pressure. However, the #BankofAmerica share price will have to break the said support as well as the 100-week SMA, before extending losses towards $34.00 (FR 50.0%) and $30.25 (FR 61.8%). On the other hand, the ‘shoulders’ at $42.50 serve as an immediate resistance, followed by the peak of the ‘head’ at $50.11.
Click here to access our Economic Calendar
Larince Zhang
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.
