Bank of America Stock Positioned for Double-Digit Expansion: Why the Valuation Still Looks Attractive

Bank of America (BAC), America’s second-largest banking institution, has delivered impressive returns with a 23.1% year-to-date advance, significantly beating the broader market. Following a robust 30.5% surge in 2024, the stock is on track for another strong year despite some catching up to competitors. While JPMorgan and Citigroup have posted steeper gains of 31.9% and 53.2% respectively, BAC’s underlying fundamentals suggest there’s more room for appreciation.

Valuation Offers an Entry Point

One of the most compelling reasons to consider Bank of America now is its valuation relative to peers. Trading at a 12-month price-to-tangible book ratio of 1.98X—below the industry average of 3.07X—BAC appears undervalued compared to JPMorgan’s 3.17X, though it trades at a premium to Citigroup’s 1.17X.

Earnings momentum further supports the bull case. Consensus estimates for 2025 and 2026 EPS have been revised upward to $3.80 and $4.35 respectively, implying growth of 15.9% and 14.5% year-over-year. Management has guided toward mid-teen earnings expansion over the medium term, providing confidence in the company’s ability to deliver shareholder value.

The Interest Rate Environment: A Mixed Picture

The Federal Reserve’s measured approach to rate cuts—having lowered borrowing costs to 3.75%-4.00% with potential further reductions ahead—creates both headwinds and tailwinds for the banking sector. While declining rates typically pressure net interest income, BAC’s management expects this impact to be partially offset by repricing on fixed-rate assets, improved deposit funding costs and growing loan volumes as economic activity picks up.

Bank of America projects 5-7% net interest income growth in 2026, with loans and deposits anticipated to expand at 5% and 4% compound annual growth rates respectively. JPMorgan and Citigroup are similarly positioned, with JPMorgan forecasting 2025 NII of $95.8 billion (up 3%+ annually) and Citigroup guiding for 5.5% growth (excluding Markets division).

Growth Drivers Beyond Interest Rates

Physical Expansion with Digital Integration: The bank’s strategy of combining 3,650 financial centers with digital capabilities is a competitive advantage often underestimated by the market. Since 2019, BAC has opened 300 new locations and entered 18 new markets, generating 170 additional financial centers and $18 billion in incremental deposits. The company plans to expand into six more markets through 2028, capitalizing on the preference for local, personalized banking relationships even in an increasingly digital world.

Investment Banking Momentum: After weakness in 2022-2023, deal activity has rebounded meaningfully. Though tariff uncertainties created temporary headwinds earlier this year, business conditions have improved as clarity on policy emerges and capital remains available for transactions. BAC targets mid-single-digit CAGR in IB fees with a 50-100 basis point market share gain, backed by AI-driven insights and expanded middle-market coverage across 87 jurisdictions.

Capital Return and Fortress Balance Sheet: Bank of America cleared this year’s Fed stress test and raised its quarterly dividend 8% to $0.28 per share—the fifth increase in five years at an 8.83% annualized growth rate. A new $40 billion share repurchase authorization demonstrates management confidence. With average global liquidity sources of $961 billion and investment-grade ratings from all three major agencies, the bank has ample flexibility for shareholder distributions.

Asset Quality Concerns Warrant Monitoring

One area of caution is credit deterioration. Loan loss provisions surged 115.4% in 2022, 72.8% in 2023 and 32.5% in 2024, with net charge-offs rising 74.9% and 58.8% in those same years. The uptrend persisted through the first nine months of 2025. Elevated interest rates have pressured some borrowers, and emerging inflation concerns tied to tariff policies could weigh on credit profiles going forward. However, this normalization from pandemic lows appears manageable given the bank’s conservative underwriting and diversified portfolio.

Investment Thesis

Even after its strong year-to-date run, Bank of America stock merits consideration. The setup for 2026 supports earnings expansion through multiple channels—NII stabilization, deposit growth, stronger IB activity and operating leverage from technology investments. The discount valuation coupled with an 8% dividend hike and substantial buyback program provides downside cushion while upside remains available as the market recognizes the company’s resilience in a moderating rate environment.

At current levels, BAC carries institutional support and a constructive outlook for the next 12-24 months.