Morgan Stanley’s Best Stocks For Economic Recovery: Top 9 Cyclical Stocks

3. Bank of America Corporation (NYSE:BAC)

Number of Hedge Fund Holders In Q3 2024: 98

Bank of America Corporation (NYSE:BAC) is one of the biggest consumer banks in America. It enjoys a sizable customer base of 66 million customers which provides it with a wide moat in the industry and ensures sufficient resources to help it weather against most major storms. While the large customer base increases interest expense pressure on Bank of America Corporation (NYSE:BAC), the bank’s presence in the investment banking market and the market presence also lets it benefit from giving out more loans when interest rates drop and economic activity rises. Additionally, Bank of America Corporation (NYSE:BAC) also benefits from a growth in investment banking income due to greater economic activity as was the case in Q3 when investment banking fees jumped by 18% to touch $1.4 billion. Looking ahead, Bank of America Corporation (NYSE:BAC) can benefit from swap maturities, fixed-rate assets, and a relaxed regulatory environment.

Bank of America Corporation’s (NYSE:BAC) management commented on its investment banking division during the Q3 2024 earnings call. Here is what they said:

“On Slide 15, you see Global Banking results. This business produced earnings of $1.9 billion down 26% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation.

In our global treasury services business, fees for managing the cash of clients continue to offset some of the NII pressure from higher rates. Investment banking had a strong quarter, growing fees 18% year-over-year to $1.4 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. We finished the quarter strong, maintaining our number three investment banking fee position. What began as a slow quarter this summer gained some momentum through September and the pipeline looking forward looks solid.”