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A month has gone by since the last earnings report for Bank of America (BAC). Shares have added about 7.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bank of America due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Bank of America Q3 Earnings Beat, IB & Trading Fee Growth

Bank of America’s third-quarter 2024 earnings of 81 cents per share surpassed the Zacks Consensus Estimate of 78 cents. The bottom line compared unfavorably with 90 cents earned in the prior-year quarter.

Behind Headline Numbers

Total IB fees (in the Global Banking division) of $783 million increased 5.4% year over year, driven by growth in underwriting income (up 24.5%). Advisory services revenues witnessed an 11.4% decline in the quarter.

Similar to the previous quarters, Bank of America recorded an improvement in trading numbers in the third quarter. Sales and trading revenues (excluding net DVA) grew 11.7% to $4.94 billion. Fixed-income trading fees increased 8%, while equity trading income jumped 17.8%.

These turned out to be major revenue growth drivers. Further, Bank of America witnessed a 2.4% year-over-year increase in total deposit balances to $1.93 trillion.

On the other hand, despite decent loan growth (loan balances rose 2.6%) and high interest rates, BofA recorded a decline in NII because of higher deposit costs.

The company’s net income applicable to common shareholders plunged 12.2% from the prior-year quarter to $6.38 billion. Our estimate for the same was $6.12 billion.

Revenues Improve, Expenses Rise

Net revenues were $25.35 billion, which beat the Zacks Consensus Estimate of $25.29 billion. Also, the top line increased almost 1% from the prior-year quarter.

NII (fully taxable-equivalent basis) fell 2.9% to $14.11 billion. Our estimate for NII was $14.27 billion. Net interest yield contracted 19 basis points (bps) year over year to 1.92%.

Non-interest income increased 5.5% to $11.38 billion. The rise was driven by an increase in total fees and commissions. We had projected a non-interest income of $10.98 billion.

Non-interest expenses were $16.48 billion, up 4%. Our estimate for non-interest expenses was $16.34 billion.

The efficiency ratio was 64.64%, up from 62.55% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.

Credit Quality Worsens

Provision for credit losses was $1.54 billion, up 25% from the prior-year quarter. We estimated the metric to be $1.44 billion.

Net charge-offs jumped 64.8% to $1.53 billion. As of Sept. 30, 2024, non-performing loans and leases as a percentage of total loans were 0.53%, up 7 bps.

Capital Position Strong

Book value per share as of Sept. 30, 2024, was $35.37 compared with $32.65 a year ago. Tangible book value per share end was $26.25, up from $23.79.

At the end of September 2024, the common equity tier 1 capital ratio (advanced approach) was 13.5%, stable year over year.

Share Repurchase Update

In the reported quarter, the company repurchased shares worth $3.5 billion.

Outlook

The company expects a modest loan and deposit growth in 2024.

Based on the assumptions of two rate cuts in the quarters, the company expects NII to grow sequentially in the fourth quarter of 2024 and be $14.3 billion or more. In 2025, NII is expected to witness a steady improvement.

The company expects to spend nearly $4 billion on technology initiatives in 2024. Total non-interest expenses in the fourth quarter are expected to be stable at $16.5 billion on a sequential basis.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Bank of America has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Bank of America has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Bank of America is part of the Zacks Financial - Investment Bank industry. Over the past month, JPMorgan Chase & Co. (JPM), a stock from the same industry, has gained 7.8%. The company reported its results for the quarter ended September 2024 more than a month ago.

JPMorgan Chase & Co. reported revenues of $42.65 billion in the last reported quarter, representing a year-over-year change of +7%. EPS of $4.37 for the same period compares with $4.33 a year ago.

For the current quarter, JPMorgan Chase & Co. is expected to post earnings of $3.81 per share, indicating a change of -4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

JPMorgan Chase & Co. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

Zacks Investment Research

The Swiss Financial Market Supervisory Authority — FINMA — has issued its goals for 2025-2028. The four objectives pertain to organization, framework conditions, resilience and supervision. The objectives outline the ways in which the FINMA will carry out its function.

FINMA's objectives include strengthening oversight of the institutions it oversees, and helping them advance their governance and risk culture toward more stringent standards and distinct risk tolerance thresholds.

FINMA Supervision on Banks

FINMA intends to enhance Switzerland's financial system's stability by continuously developing supervisory instruments, procedures, and analysis to prevent and rectify irregularities, and ensure sound governance and robust risk management processes.

As part of its supervision, FINMA will continue to place a high priority on supervised institutions' financial resilience. It will focus on how supervised institutions manage market, credit, liquidity and actuarial risks. The regulator will also ensure that institutions maintain adequate capital and liquidity to survive major financial shocks.

FINMA will contribute to financial market regulation by advocating for effective supervision and early intervention, considering technological developments, and creating a supervisory framework for the Swiss financial market. This will ensure transparency and technology-neutral application.

FINMA will increase its efficiency as a supervisory authority, utilizing internal synergies and pushing for digital transformation. It will gradually increase direct supervision and actively report on its activities and mandate fulfillment.

FINMA Increase Supervision on UBS

FINMA stated that it would regularly assess how it oversees UBS Group AG UBS as the country's authorities prepare to overhaul regulations to make the banking sector stronger. The supervisory approach for UBS will be reviewed on an ongoing basis and refined as necessary so that the risks associated with its systemic importance can be countered at all times.

Following Credit Suisse's collapse in 2023 and subsequent takeover by long-time rival UBS, the Swiss government presented several proposals in April to tighten banking sector regulations.

Among the proposals were increased powers for FINMA, although authorities are yet to decide how broad the new regulations should be. That procedure is projected to continue well into next year. As a follow-up to such recommendations, the government stated that it will make an announcement on FINMA's supervisory instruments in the first half of 2025.

UBS and Switzerland's three other systemically significant banks — Raiffeisen Group, PostFinance and Zuercher Kantonalbank — must be able to be restructured, wound up, or sold off without jeopardizing Swiss and international financial stability, FINMA informed.

With enhanced bank supervision and new strategic goals, FINMA has been advocating for greater monitoring powers, including the right to identify and shame banks that break its laws and pay fines.

US Banking Supervision by Regulators

Similar to Swiss regulations, U.S. banks are exposed to several regulations by authorities. The 2008 financial crisis gave rise to this annual assessment, which covered institutions with at least $100 billion in assets, including JPMorgan Chase & Co. JPM, Goldman Sachs Group Inc. GS and Bank of America Corp. BAC. The stress tests, mandated under the Dodd-Frank financial services law, evaluate banks' capital adequacy, liquidity and risk management practices under adverse hypothetical scenarios, such as a deep recession and/or a sharp decline in asset prices.

In the wake of the 2008 financial crisis, the Dodd-Frank legislation passed in 2010 mandated that banks of a certain size create these plans regularly, outlining how they could be wound down in the event of a crisis without endangering the larger financial system. In June 2024, U.S. banking regulators detected flaws in strategies that JPM, GS and BAC submitted outlining their plans for winding down during a catastrophic event. All three banks were advised to report to regulators on plans to correct their inadequacies by September.

Zacks Investment Research

Here at Zacks, we offer our members many different opportunities to take full advantage of the stock market, as well as how to invest in ways that lead to long-term success.

One of our most popular services, Zacks Premium offers daily updates of the Zacks Rank and Zacks Industry Rank; full access to the Zacks #1 Rank List; Equity Research reports; and Premium stock screens like the Earnings ESP filter. All are useful tools to find what stocks to buy, what to sell, and what are today's hottest industries.

It also includes the Focus List, a long-term portfolio of top stocks that have all the elements to beat the market.

Breaking Down the Zacks Focus List

Building an investment portfolio from scratch can be difficult, so if you could, wouldn't you take a peek at a curated list of top stocks?

That's what the Zacks Focus List, a portfolio of 50 stocks, offers investors. Not only does it serve as a starting point for long-term investors, but all stocks included in the list are poised to outperform the market over the next 12 months.

What makes the Focus List even more helpful is that each selection is accompanied by a full Zacks Analyst Report, which explains the reasoning behind every stock's selection and why we believe it's a good pick for the long-term.

The portfolio's past performance only solidifies why investors should consider it as a starting point. For 2020, the Focus List gained 13.85% on an annualized basis compared to the S&P 500's return of 9.38%. Cumulatively, the portfolio has returned 2,519.23% while the S&P returned 854.95%. Returns are for the period of February 1, 1996 to March 31, 2021.

Focus List Methodology

When stocks are picked for the Focus List, it reflects our enduring reliance on the power of earnings estimate revisions.

Earnings estimates, or expectations of growth and profitability, come from brokerage analysts who track publicly traded companies; these analysts work together with company management to analyze every aspect that may affect future earnings, like interest rates, the economy, and sector and industry optimism.

What a company will earn down the road also needs to be taken into consideration, and this is why earnings estimate revisions are so important.

Stocks that receive upward earnings estimate revisions are more likely to receive even more upward changes in the future. For example, if an analyst raised their estimates last month, they're more likely to do it again this month, and other analysts are likely to do the same.

Harnessing the power of earnings estimate revisions is where the Zacks Rank comes in. The Zacks Rank is a unique, proprietary stock-rating model that utilizes changes to a company's quarterly earnings expectations to help investors build a winning portfolio.

There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise. Each one of these features is then given a raw score that's recalculated every night and compiled into the Rank. Using this data, stocks are classified into five groups, ranging from "Strong Buy" to "Strong Sell."

The Focus List is comprised of stocks hand-picked from a long list of #1 (Strong Buy) or #2 (Buy) ranked companies, meaning that each new addition boasts a bullish earnings consensus among analysts.

It can be very profitable to buy stocks with rising earnings estimates, as stock prices respond to revisions. By adding Focus List stocks, there's a great chance you'll be getting into companies whose future earnings estimates will be raised, which can lead to price momentum.

Focus List Spotlight: JPMorgan Chase & Co. (JPM)

Headquartered in New York, JPMorgan Chase & Co. is one of the biggest global banks with assets worth $4.21 trillion and stockholders’ equity worth $345.8 billion as of Sept. 30, 2024. With operations in more than 60 countries, the company (incorporated under Delaware law in 1968) is one of the largest financial service firms in the world.

JPM, a #3 (Hold) stock, was added to the Focus List on October 10, 2016 at $68.11 per share. Since then, shares have increased 254.07% to $241.16.

Four analysts revised their earnings estimate upwards in the last 60 days for fiscal 2024. The Zacks Consensus Estimate has increased $0.90 to $17.62. JPM boasts an average earnings surprise of 7.7%.

Earnings for JPM are forecasted to see growth of 8.6% for the current fiscal year as well.

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Zacks Investment Research

Houston, Texas-based APA Corporation explores for, develops, and produces natural gas, crude oil, and natural gas liquids. With a market cap of $8.1 billion, the company also has exploration and appraisal activities in Suriname, as well as holds interests in projects located in Uruguay and internationally.

Shares of this independent energy company have significantly underperformed the broader market over the past year. APA has declined 39.9% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 35.7%. In 2024, APA stock is down 38.6%, compared to the SPX’s 25.5% rise on a YTD basis.

Narrowing the focus, APA’s underperformance looks less pronounced compared to the SPDR S&P Oil & Gas Exploration & Production ETF . The exchange-traded fund has gained about 2.2% over the past year. Moreover, the ETF’s 3.2% gains on a YTD basis outshine the stock’s double-digit losses over the same time frame.