Shares in Bank of America are trading higher ahead of the market open on Tuesday.
The US bank has seen its share price surging higher this year as a result of the uptick in US yields. The increase in yields allows BAC to benefit from higher lending rates to customers. This has fuelled a more than 34% rally this year.
While the bank’s shares are currently correcting from recent highs of just below the 40 market, the technical and fundamental outlook for the bank remains firmly bullish.
BAC CEO Forecasts Earnings Jump On Rate Rise
Speaking with Barron’s this week, BAC CEO Brian Moynihan said that the bank forecasts its earnings to “substantially increase” from the rise in interest rates amidst the ongoing lift in global yields.
As a result of higher rates, deposit numbers have increased by around 7% on the same period a year prior. Moynihan explained that the bank is then able to re-deploy these low-costs deposits into higher-yielding loans.
The bank, which is the largest retail bank in the US and the second largest in terms of market capitalization, is focusing firmly on internal growth, investing $3 billion annually on upgrading its technology in order to provide better services to its customer base.
BAC CEO Optimistic In Outlook
Looking ahead, Moynihan said that the bank is keen to initiate further share buybacks once it has the approval to do so from regulators.
Additionally, Moynihan said that investors could expect a higher level of loan loss reserves to be released over the coming year as the US moved further past the height of the pandemic.
Higher Earnings Estimates
Current projections for BAC earnings this year peg the company to realize a 32% jump in earnings per share to $2.47 this year according to FactSet. The group also forecasts the bank’s earnings to rise a further 17% over the next year to $2.89 per share in 2022.
BAC Shares Correcting from Channel Top
The sell-off in BAC shares from the 39.95 level is yet to gain any proper momentum, with price stalling just off the highs around the mid 37 level.
The breakout above the 35.71 level multi-year resistance was a major technical development and keeps the bias firmly bullish in the near term while the level holds as support.
Below there, the next support to note is the 43.35 level with the rising channel low in the area also.