Analysis of Sustainability of Bank of America (BAC)'s 2025 Earnings Growth and Its Impact on Banking Sector Valuation

Now I will prepare a systematic and comprehensive analysis report for you.

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Based on the newly released Q4 and full-year 2025 earnings report, Bank of America delivered strong financial results [0][1]:

Key Metric	2025	2024	Year-on-Year Change
Full-Year Net Profit	$30.5 Billion	$26.97 Billion	+19%
Earnings Per Share (EPS)	$3.81	$3.19	+19%
Full-Year Revenue	$113.1 Billion	$105.9 Billion	+7%
Q4 Net Profit	$7.6 Billion	$6.8 Billion	+12%
Q4 Revenue	$28.37 Billion	$26.48 Billion	+7%
Net Interest Income (NII)	$60.1 Billion	$56.1 Billion	+10%
Average Return on Equity (ROE)	10.5%	9.5%	+100bps
Return on Tangible Common Equity (ROTCE)	14.2%	12.9%	+130bps

Brian Moynihan, Chief Executive Officer of the company, stated: “In 2025, we achieved a net profit of over $30.5 billion, with earnings per share growing by 19%. As consumers and businesses demonstrate resilience, coupled with an increasingly clear regulatory environment and tax and trade policies, we expect further economic growth in 2026 and are optimistic about the U.S. economy.” [1]

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Net interest income is Bank of America’s most important profit engine, growing 10% year-on-year to $60.1 billion in 2025 [0][1]. This growth is driven by multiple factors:

As the Federal Reserve’s interest rate cut cycle progresses, the yield on fixed-rate assets held by the bank is gradually adjusted and repriced, driving improvements in net interest margin. Alastair Borthwick, CFO of Bank of America, noted that fixed-rate asset repricing is an important contributor to NII growth.

In the Federal Reserve’s interest rate cut environment, the cost of the bank’s liability side (deposits) is declining faster than the yield on the asset side, creating an interest rate environment favorable to net interest margin.

• Average deposit balance reached $1.98 trillion, up 3% year-on-year, achieving sequential growth for 10 consecutive quarters [1]
• Average loan and lease balance reached $1.17 trillion, up 8% year-on-year, with growth across all business segments

The net interest margin in the fourth quarter reached 2.08%, continuing to improve from 2.01% in the third quarter and 1.97% in the same period last year [1].

The Goldman Sachs analyst team pointed out that the NII “recovery cycle” is very strong and can extend to 2027, and it is expected that securities repricing can bring about a 2% annualized increase in NII and a 3% contribution to EPS [2][3].

Sales and trading revenue in the fourth quarter reached $4.5 billion, up 10% year-on-year, achieving year-on-year growth for 15 consecutive quarters [1]:

• Fixed Income, Currencies & Commodities (FICC) revenue reached $2.5 billion, up 2% year-on-year
• Equities business revenue reached $2.0 billion, surging 23% year-on-year

Increased market volatility has stimulated client trading activities, and the uncertainty brought by the Trump administration’s tariff policies has instead boosted trading revenue.

Global Wealth & Investment Management (GWIM) recorded full-year revenue of $24.9 billion, up 9% year-on-year [1]:

• Asset management fee revenue reached $4.1 billion, up 13% year-on-year
• Client asset balance reached $4.8 trillion, up 12% year-on-year
• Approximately 21,000 net new relationships were added throughout the year

Investment banking fees (excluding proprietary trading) reached $1.7 billion in the fourth quarter, up 1% year-on-year [1]:

• M&A advisory fees increased by 6.1%
• Debt issuance revenue increased by 5.9%
• Equity issuance revenue decreased by 18% year-on-year

JPMorgan Chase executives expect that M&A and financing activities will pick up in 2026 as transaction reserves are sufficient and corporate clients that previously postponed activities return to the market [2].

Bank of America’s efficiency ratio improved from 63% in 2024 to 62% in 2025, and further improved to 61% in the fourth quarter [1][4]. The efficiency improvement mainly comes from:

• Stringent expense management
• Operational cost savings from digital transformation
• Operating leverage effect driven by revenue growth

• Provision for credit losses decreased from $5.82 billion in 2024 to $5.68 billion in 2025 [1]
• Net charge-off rate decreased from 0.57% to 0.50%
• 90+ day delinquency rate for credit cards decreased from 1.35% to 1.27%
• Risk-adjusted profit margin for credit cards remained at a healthy level of 7.0%

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Factor	Impact	Sustainability
NII Recovery Cycle	Expected to extend to 2027, asset repricing contributes approximately 2% NII growth	High
Trading Business	Market volatility + policy uncertainty = increased trading activities	Medium-High
Wealth Management	Market rally + net inflows = growth in asset management fees	Medium-High
Operational Efficiency	Continuous digital advancement + operating leverage	Medium-High
Capital Return	Regulatory easing + sufficient capital = growth in share buybacks and dividends	High
Consumer Resilience	6% growth in consumer spending + improved credit	Medium

Risk	Potential Impact	Risk Level
Further Interest Rate Declines	May compress net interest margin earnings	Medium
Rising Credit Card Default Rates	May worsen in the event of an economic recession	Medium
Investment Banking Recovery Below Expectations	Postponement of M&A activities	Medium
Changes in Regulatory Policies	Policy uncertainty under the Trump administration	Medium
Risk of Economic Recession	Affects all business lines	Medium-High
Trump’s Credit Card Interest Rate Proposal	Proposed 10% interest rate cap may compress profits	Low-Medium

Based on the above analysis, earnings forecasts under various scenarios are as follows [0][2][4]:

Scenario	Growth Assumption	2026 EPS Forecast	Corresponding Stock Price (P/E 13x)
Conservative	5% growth	$4.00	$52.00
Base	8% growth	$4.11	$53.43
Optimistic	12% growth	$4.27	$55.51

The Goldman Sachs analyst team predicts that bank stocks will benefit from three major drivers in 2026: “visible NII recovery + expense resilience + operating leverage”, and recommends investors accumulate large comprehensive bank stocks on dips [2][3].

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Valuation Metric	Current BAC Value	Industry Average	Premium/Discount
P/E (TTM)	13.26x	13.0x	+2%
P/B (TTM)	1.29x	1.2x	+7.5%
P/S (TTM)	2.03x	-	-
ROE	9.92%	-	-

The current stock price is $52.44, with approximately 18% upside potential compared to the consensus target price of $52, and the target price range is $50-$71 [0][4].

Goldman Sachs emphasizes that core valuation metrics such as price-to-book ratio (P/B) for large-cap banks are still at low levels, leaving room for valuation recovery [2][3]:

• Sustained NII improvement exceeding market expectations
• Recovery in investment banking fee income
• Regulatory easing by the Trump administration
• Accelerated capital return (share buybacks + dividends)

1. Bank of America (BAC) - Core Pick
2. Citigroup ©
3. JPMorgan Chase (JPM)
4. U.S. Bancorp (USB)
5. Wells Fargo (WFC)

Valuation range of Bank of America based on different P/E scenarios:

Scenario	P/E Assumption	2026 EPS	Target Stock Price	Relative to Current Price
Conservative	11x	$4.11	$45.21	-14%
Base	13x	$4.11	$53.43	+2%
Optimistic	15x	$4.11	$61.65	+18%

Based on technical analysis results [0]:

• Trend Judgment
  : Sideways consolidation / no clear trend
• Trading Range
  : $52.07 - $55.45
• MACD Signal
  : Bearish crossover, bearish bias
• KDJ Indicator
  : K=20.1, D=35.9, bearish bias
• RSI (14)
  : Oversold territory, potential rebound opportunity
• Beta Coefficient
  : 1.29 (higher volatility relative to SPY)

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As the second-largest bank in the U.S., Bank of America’s strong performance has important signaling implications for the large-cap banking sector:

• NII bottoming and rebounding is confirmed
• Trading business has become a new growth engine
• Operational efficiency continues to improve

Bank of America and JPMorgan Chase have successively released better-than-expected results, laying a good foundation for the 2026 U.S. stock earnings season [2][4].

Strong performance coupled with optimistic management outlook may drive the recovery of banking sector valuation from current low levels.

Goldman Sachs breaks down the 2026 bank stock investment main line into four core themes [2][3]:

Theme	Core Logic	Expected Impact
NII-Driven	Recovery cycle extends to 2027	5-8% earnings growth
Investment Banking/Capital Markets	M&A activities pick up + active trading	5-10% fee growth
Capital Condition Reform	Regulatory easing + accelerated capital return	Share buybacks + dividend growth
Operating Leverage	Revenue growth outpaces expense growth	Efficiency ratio improvement

Catalyst	Time Window	Potential Impact
4Q25 Earnings Exceed Expectations	January 2026	Achieved
Investment Banking Recovery	Throughout 2026	Medium-term
Regulatory Capital Reform	Mid-2026	Medium-term
Federal Reserve Interest Rate Cut Path	Throughout 2026	Continuous
M&A Activities Pick Up	H2 2026	Long-term

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• Conclusion
  :
  Medium-High Sustainability
• Main Supports: NII recovery cycle extends to 2027, sustained growth in trading business, improved operational efficiency
• Main Risks: Further interest rate declines, credit card defaults, investment banking recovery below expectations

• Conclusion
  :
  Room for Valuation Recovery Still Exists
• Current P/E of 13.26x is slightly higher than the industry average, and P/B of 1.29x is slightly higher than the industry average
• Against the backdrop of sustained earnings improvement and expectations of regulatory easing, bank stock valuation is expected to further recover

Rating Item	Rating
Bank of America (BAC)	Buy (Consensus Rating)
Large-Cap Banking Sector	Accumulate
Relative to Market	Market Weight

1. Interest Rate Risk
   : The Federal Reserve’s interest rate cut pace may be faster than expected, compressing net interest margin
2. Credit Risk
   : An economic recession may lead to an increase in credit card and commercial loan defaults
3. Regulatory Risk
   : Policy uncertainty exists under the Trump administration
4. Valuation Risk
   : Current valuation has partially priced in optimistic expectations
5. Market Volatility Risk
   : Trading business revenue is highly correlated with market volatility

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The chart above shows Bank of America’s quarterly performance trends from 2024 to 2025, including:

• Top Left
  : Quarterly revenue trend (2024 vs 2025 comparison)
• Top Right
  : Earnings Per Share (EPS) trend
• Bottom Left
  : Net Interest Income (NII) trend
• Bottom Right
  : Return on Equity (ROE) changes

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[0] Jinling AI API Data - Bank of America (BAC) Company Overview, Financial Analysis, Technical Analysis, Market Index Data

[1] Bank of America Corporation Form 8-K Filing (2026-01-14) - SEC Official Document
https://www.sec.gov/Archives/edgar/data/70858/000007085826000020/bac-20260114.htm

[2] Goldman Sachs 2026 U.S. Bank Stock Outlook Report - Sina Finance
https://finance.sina.com.cn/stock/hkstock/hkstocknews/2026-01-08/doc-inhfqtyr6714428.shtml

[3] NII Recovery Cycle Extends Straight to 2027! Wall Street Giants Leading the Earnings Season Will Fuel the U.S. Stock Bull Market - Zhitong Finance Network
https://news.futunn.com/post/67112999/nii-recovery-cycle-heading-straight-to-2027-wall-street-giants

[4] Bank of America’s Earnings Grow but Valuation Risks Lurk - CMoney
https://www.forecastock.tw/article/cmoneyairesearcher-e4e50f19-ef39-11f0-bda2-93dabdd6f7b8

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: January 14, 2026

This report is automatically generated by Jinling AI based on public information, for reference only, and does not constitute investment advice. Investors should make independent investment decisions based on their own risk tolerance.