Bank of America Corp (NYSE:BAC) has touched its multi-year high, and there is a good chance that the stock might go up further. The bank is expected to benefit from improving macroeconomic conditions and fundamental performance. This is not only about market sentiments, but also about the underneath numbers which the bank has been producing outstandingly.
The bank is also expected to become more efficient in its business by cutting down its expenses and growing its revenue organically. The bank is also expected to give more return to its shareholders by increasing its return on tangible equity (ROTCE) and also on capital payouts. The ROTCE will be improved through higher earning power and a better balance sheet and capital management. The bank’s reduced earnings volatility will be an important element in pulling up the stock price in the medium term.
The dividend yield of the bank stands at 1.5%, and the average book value growth is at 8%; these matrices will soon translate into an attractive return for the bank. The bank has been accused recently of not making timely payments to the Federal Deposit Insurance Corp. The bank owes at least $42 million to the regulator, who has claimed that the underpayments go back to 2011 and currently stand at more than $1 billion. On the other hand, Bank of America has said that the disagreement between the organizations has arisen due to a technical disagreement.
The lawsuit can also affect the cash flow of the bank which can impact both, its valuation and stock price. Bank of America said in a statement: "The amount in question, derived from a technical disagreement about a calculation from several years ago regarding a rule that has had changing provisions over time, comprises a fraction of what we annually pay to the FDIC." In case the bank is able to settle this case at a favorable amount, the current enthusiasm of the investors will not be impacted.