Is Bank of America Corp (BAC) a Good Investment?

The biggest drag for most of the banks has been the mortgage portfolio, and most of these banks have been trying to get rid of this drag. Citigroup Inc (NYSE:C) recently negotiated a $968 million mortgage claim settlement with Fannie Mae to resolve potential future repurchase claims for breaches of representations and warranties on 3.7 million residential first mortgage loans sold to Fannie Mae. The payment was covered by the already existing mortgage repurchase reserves of the bank.

The third stock to consider in the banking sector is Goldman Sachs Group Inc (NYSE:GS). There has been a shift in focus towards cost efficient operations instead of top line growth by all the major players in the industry. Goldman Sachs Group Inc (NYSE:GS) has been successful in pursuing its cost cutting measures and the bank has been able to report impressive earnings. Most of the segments of Goldman Sachs Group Inc (NYSE:GS) are performing well now and with the cost cutting measures in place, earnings should improve further. Furthermore, an upward trend in the economy and the housing sector should augment the revenue and play a vital role in the recovery of these banks.

Conclusion

As I have mentioned above, the system is stronger at the moment and provides a better platform for the banks to operate. In addition, the economic recovery is gathering pace, which should allow the banks to bring in higher income. The weakest segment of the economy over the past five years, the housing sector, also seems to be doing well, which will result in higher income from Bank of America Corp (NYSE:BAC)’s real estate segment. Overall, I believe that the bank is ready to appreciate further.

Ishtiaq Ahmed has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Goldman Sachs. The Motley Fool owns shares of Bank of America and Citigroup Inc (NYSE:C). Ishtiaq is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is Bank of America a Good Investment? originally appeared on Fool.com is written by Ishtiaq Ahmed.

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