We recently compiled a list of the 7 Best Bank Stocks To Buy in 2024. In this article, we are going to take a look at where Bank Of America Corporation (NYSE:BAC) stands against the other bank stocks.
The largest dip since August occurred in U.S. stocks on September 4, 2024, when the market fell 1.6%. The decline was mostly caused by drops in the technology and energy markets amid economic uncertainty. The market remained volatile, and worries about jobs and economic data mounted, as the August BLS report shows the US created fewer than anticipated jobs in August 2024. Nonfarm jobs grew at 142,000 but remained below the Dow Jones forecast of 161,000. However, the unemployment rate went down from 4.3% in July to 4.2% in August.
Treasury yields dropped to 3.85% as investor attention turned to impending payroll data that may have an impact on the Fed’s interest rate decisions. Despite a historically challenging September, some analysts see possible drops as buying opportunities, citing investors’ controlled inflation and high cash reserves.
Despite the financial volatility, the financial services industry’s long-term outlook is still favorable. As we discussed in our article “25 Biggest Financial Firms in the World,” the financial services industry is projected to grow at a 7.7% CAGR from $31138.82 billion in 2023 to $33539.52 billion in 2024.
According to IBM’s report, financial services are being revolutionized by generative AI, which increases productivity and automates tasks. AI speeds up fraud detection by 50% and decreases transaction processing times by 30%, as per IBM’s survey. While 75% of financial workers expect AI to automate 25% of their duties, it aids in the analysis of market trends in investment management. AI-driven chatbots reduce human labor by 80% and increase query processing accuracy by 85% in customer support. Furthermore, generative AI improves data management in CRM systems by automatically summarizing calls and extracting insights, boosting CRM update efficiency by 30% and saving companies millions of dollars in operating expenses while strengthening client relationships.
Specifically, the global retail banking market was valued at $2.08 trillion in 2023 and $2.21 trillion this year, according to the Precedence Research. The market is projected to grow at a CAGR of 6% to reach approximately $3.97 trillion by 2034, per the research. In 2023, Asia Pacific held the highest share of 34.14% in the market. It is anticipated that North America is predicted to be the second-largest region for the retail banking market during the projection period.
Looking ahead, the 2024 U.S. Banking Industry Outlook Survey by KPMG outlines the major obstacles and prospects that banks face in the face of technological, regulatory, and financial disruptions. Of the 200 banking CEOs surveyed, 65% claimed that generative artificial intelligence is an integral part of their institution’s long-term vision and strategy, and 60% said that their companies have GenAI-enabled cybersecurity in both pilot and production stages. Despite challenges including interest rate risks and geopolitical unpredictability, two-thirds of executives are still confident in their bank’s growth prospects, with 59% predicting inorganic profitability growth. Regulatory intensity dominates focus, with 80% thinking regulatory supervision and enforcement in the area of cyber risk will increase, while 55% of institutions have boosted their resources to manage cyber threats. Moreover, following the Fedwire and SWIFT deadlines in November 2025 and March 2025, respectively, ISO 20022 compliance is a top priority for U.S. banks.
Methodology:
We sifted through holdings of bank ETFs and financial media covering bank stocks to form an initial list of 20 bank stocks. Then we selected the 7 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A professional banker providing consultation to a customer in the security of his office.
Bank Of America Corporation (NYSE:BAC)
Number of Hedge Fund Investors: 92
Following the 2008 financial crisis and years of problems, Bank Of America Corporation (NYSE:BAC) has become the second-biggest commercial bank in the United States in terms of total assets. The bank has a strong commercial banking franchise, is a Tier 1 investment bank, and ranks among the top four credit card issuers and acquirers in the US. It is one of the best retail branch networks and overall retail franchises in the country and owns the Merrill Lynch franchise, which has grown into one of the top brokerage and advisory firms in the country.
The four main business segments of BAC are Global Wealth & Investment Management (GWIM), Global Banking, Global Markets, and Consumer Banking. Through business diversification, BAC lowers the risk associated with market and industry-specific downturns while offering a wide range of banking and nonbank financial services and products.
Since its introduction in 2024, the prominent bank’s virtual financial assistant, Erica, has supported both corporate and individual services for over two billion customers.
Bank Of America Corporation (NYSE:BAC) reported better-than-expected earnings for the second fiscal quarter 2024 due to strong performance in the investment banking division and strong net interest income. The earnings report caused the share price to rise by more than 5% YoY, hitting a high not seen since the beginning of FY 2022.
ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
While potential rate cuts and increasing deposit costs could put pressure on future profitability, analysts think that the company’s growth potential is backed up by its strong revenue from trading and investment banking as well as its favorable net interest income projections.
BAC is one of the Best Bank Stocks To Buy in 2024 since it has promising growth potential. As seen by 19 analysts, BAC has a consensus Buy rating with an average price target of $42.39 and an upside potential of 5.61% from the current stock price.
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 1,032,852,006 shares worth $41.08 billion.
Overall BAC ranks 2nd on our list of the best bank stocks to buy. While we acknowledge the potential of BAC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
