Bank of America (BAC) Q2 2021 Earnings Preview: Key Insights & Price Impact

Investors are closely monitoring Bank of America's (BAC) upcoming Q2 2021 earnings report, scheduled before market open on July 14. The focus remains on whether the bank can sustain its Q1 momentum by boosting earnings per share (EPS) and navigating revenue challenges.

Highlights to Watch

• Analysts project EPS at $0.76, a significant increase from $0.37 in Q2 2020.
• Equities trading revenue is anticipated to grow year-over-year.
• Fixed income, currency, and commodities (FICC) trading revenue is expected to decline compared to last year.
• Overall revenue may dip due to persistently low interest rates and reduced market volatility.

After a challenging 2020 marked by pandemic-related setbacks, Bank of America rebounded strongly in Q1 2021. Reflecting this positive shift, the bank announced a 21% increase in its quarterly dividend for Q3, following the Federal Reserve's relaxation of dividend and share repurchase restrictions post-stress tests.

Market participants will analyze whether BAC can maintain growth momentum in Q2. While EPS is forecasted to rise substantially, the revenue outlook is mixed, with expectations of a slight decline marking the sixth revenue drop in seven quarters.

Trading revenue remains a focal point, particularly from equities and FICC desks. Elevated market volatility in 2020 boosted these revenues, but calmer markets in 2021 pose challenges. Analysts predict equities trading revenue to increase healthily, whereas FICC trading revenue may see a notable decrease.

Bank of America's stock has outperformed the broader market over the past year, delivering a remarkable 71.8% total return versus the S&P 500's 39.0%. This surge accelerated after the 2020 U.S. presidential election and promising COVID-19 vaccine developments.

Bank of America Earnings Performance Overview

Q1 2021 earnings surpassed analyst expectations, with EPS soaring 116.1% year-over-year, halting a four-quarter streak of EPS declines. Revenue edged up 0.2%, marking the first growth since Q3 2019. Despite low interest rates pressuring revenue, improving credit conditions and accelerating economic recovery supported results.

Conversely, Q4 2020 results saw EPS drop 20.2% and revenue decline 10.1%, reflecting pandemic-related headwinds. However, signs of economic stabilization, including increased consumer spending and steady loan demand, offered optimism.

Looking ahead, Q2 2021 EPS is expected to rise 103.4%, the second-fastest growth rate in ten quarters, while revenue is forecasted to dip 2.6%. For the full fiscal year 2021, analysts anticipate EPS growth of 63.4% and modest revenue growth of 2.3%, the strongest since 2018.

Source: Visible Alpha

Key Metrics to Monitor

With net interest income pressured by historically low rates, Bank of America increasingly relies on trading desks for revenue. Elevated volatility in 2020 boosted trading profits, but calmer markets in 2021 challenge this trend.

Equities trading revenue grew 20.7% in 2020, driven by strong Q1 and Q4 performances (+43.0% and +29.8%, respectively). After slowing to 8.6% growth in Q1 2021, analysts expect a 13.0% increase in Q2 and 4.8% growth for the full year.

FICC trading revenue rose 17.2% in 2020, with gains concentrated in the first half. However, after declines in Q3 and Q4, Q1 2021 saw a 10.1% increase, but Q2 is projected to drop 18.0%, the steepest since Q3 2017. Full-year FICC revenue is expected to fall 4.2%, the first decline since 2019.

For media tips or inquiries, please contact Investopedia at tips@investopedia.com.

Discover the latest news and current events in Company News as of 18-07-2021. The article titled " Bank of America (BAC) Q2 2021 Earnings Preview: Key Insights & Price Impact " provides you with the most relevant and reliable information in the Company News field. Each news piece is thoroughly analyzed to deliver valuable insights to our readers.

The information in " Bank of America (BAC) Q2 2021 Earnings Preview: Key Insights & Price Impact " helps you make better-informed decisions within the Company News category. Our news articles are continuously updated and adhere to journalistic standards.