NYSE: BAC

BANK OF AMERICA CORP Report created Jul 14, 2021 Page 1 OF 5

Bank of America is one of the largest financial companies in the world. The company is primarily a U.S. Argus Recommendations
retail and commercial bank, with a network of more than 4,000 branches across much of the country. The
2005 acquisition of MBNA made Bank of America the nation's largest credit-card lender. As such, trends in
consumer interest rates, employment, income growth and borrowing patterns represent a significant risk Twelve Month Rating SELL HOLD BUY
to the company's earnings. The 2008 acquisition of Countrywide made BofA the country's largest
mortgage company as well. BofA became a top-tier securities firm and retail broker with the acquisition of Five Year Rating SELL HOLD BUY
Merrill Lynch.
Under Market Over
Sector Rating Weight Weight Weight
Analyst's Notes
Argus assigns a 12-month BUY, HOLD, or SELL rating to each
Analysis by Stephen Biggar, July 14, 2021 stock under coverage.
ARGUS RATING: BUY • BUY-rated stocks are expected to outperform the market (the
benchmark S&P 500 Index) on a risk-adjusted basis over the
next year.
• Above-trend capital markets revenues and loss provision reversal maintain EPS uptrend in 2Q
• HOLD-rated stocks are expected to perform in line with the
• On July 15, the company reported 2Q21 earnings of $1.03 per share, up from $0.37 a year earlier market.
and above the $0.77 consensus. Net revenues were down 4%. • SELL-rated stocks are expected to underperform the market
on a risk-adjusted basis.
• Results benefited from a $1.6 billion loan loss provision reversal, in recognition of overly conservative
The distribution of ratings across Argus' entire company
loss provisions at the height of the pandemic. universe is: 72% Buy, 28% Hold.
• Capital markets revenues remain in a strong uptrend, and we expect will continue to outweigh
pressure on the lending business due to low interest rates. We are raising our 2021 EPS estimate
given the improved credit quality outlook. Key Statistics
Key Statistics pricing data reflects previous trading day's closing
• We believe that BAC shares, trading at 12-times our revised 2021 EPS estimate, remain attractively price. Other applicable data are trailing 12-months unless
valued. Our target price of $44 assumes a multiple of 14-times our 2021 EPS estimate. otherwise specified

Market Overview
INVESTMENT THESIS Price $39.86
We are maintaining our BUY rating on Bank of America Corp. (NYSE: BAC) and Target Price $44.00
target price of $44 following the company's 2Q results. The quarter included net interest 52 Week Price Range $22.95 to $43.49
margin contraction (on lower interest rates), but also a loan loss provision reversal amid a Shares Outstanding 8.57 Billion
better credit quality outlook and still above-trend capital markets revenues. Lower loan Dividend $0.72
balances (down 12% year over year in 2Q) remain a headwind, but we expect loan growth Sector Overview
to improve in the second half of the year as government stimulus measures roll off and Sector Financial
economic re-opening continues. Sector Rating OVER WEIGHT
Management continues to focus on what it terms 'responsible growth.' We believe this Total % of S&P 500 Market Cap. 11.00%
may be seen in the company's ability to expand its loan portfolio without taking on too Financial Strength
much credit risk, and to maintain balanced growth across segments so that more volatile Financial Strength Rating MEDIUM-HIGH
businesses, such as trading and investment banking, do not account for an outsized portion Debt/Capital Ratio 66.2%
of profits. Return on Equity 9.5%
We believe that the current BAC share price undervalues the franchise. We are raising Net Margin 24.1%
Payout Ratio 0.26
Market Data Pricing reflects previous trading week's closing price. Current Ratio --
200-Day Moving Average Target Price: $44.00 52 Week High: $42.10 52 Week Low: $37.79 Closed at $40.04 on 7/9 Revenue $91.04 Billion
Price After-Tax Income $21.93 Billion
($)
Valuation
40
Current FY P/E 13.07
Prior FY P/E 21.32
30
Price/Sales 3.75
20 Price/Book 1.37
Book Value/Share $29.07
Market Capitalization $341.57 Billion
Rating BUY
HOLD
SELL Forecasted Growth
EPS 1 Year EPS Growth Forecast
($) 63.10%
5 Year EPS Growth Forecast
9.50%
Quarterly 0.70 0.74 0.75 0.74 0.40 0.38 0.51 0.59 0.86 1.03 0.64 0.69 0.71 0.77 0.74 0.80
2.94 1.87 3.05 ( Estimate) 3.08 ( Estimate)
1 Year Dividend Growth Forecast
Annual
8.33%
Revenue
($ in Bil.) Risk
Beta 1.24
Quarterly 23.2 23.1 22.8 22.3 22.8 22.3 20.3 20.1 22.8 21.5 21.7 22.2 22.7 23.5 22.7 23.1 Institutional Ownership 71.21%
Annual 91.4 85.5 88.1 ( Estimate) 92.0 ( Estimate)
FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Dec 31 2019 2020 2021 2022

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©2021 Argus Research Company Argus Analyst Report

 NYSE: BAC

BANK OF AMERICA CORP Report created Jul 14, 2021 Page 2 OF 5

Analyst's Notes...Continued
our 2021 EPS estimate given a better credit quality outlook. Our
target price of $44 assumes a multiple of 14-times our 2021 EPS
estimate.
RECENT DEVELOPMENTS
BAC shares are up 68% over the past year, versus a 38%
increase for the broad market.
On July 15, the company reported 2Q21 earnings of $1.03 per
share, up from $0.37 a year earlier and above the $0.77 consensus.
Net revenues were down 4% to $21.5 billion, as reduced net
interest income from a narrower net interest margin and lower
trading revenues were partly offset by greater investment banking
and investment brokerage revenues.
Net charge-offs were 0.27% of average loans, down from
0.45% a year earlier. The company had a negative $1.6 billion loss
provision, versus a provision of $5.1 billion a year earlier,
reflecting a recapture of overly conservative loss provisions at the
height of the pandemic.
Noninterest expenses were $15.1 billion, up 12% from the prior
year, and pretax income rose sharply to $8.0 billion from $3.8
billion.
EARNINGS & GROWTH ANALYSIS
Bank of America has four operating segments: Consumer
Banking, Global Wealth and Investment Management, Global
Banking, and Global Markets. First-quarter results by segment
follow below.
In Consumer Banking, 2Q pretax income was up sharply to
$4.0 billion from only $93 million, driven mainly by a reversal to
the provision for credit losses of $697 million, versus a provision of
$3.0 billion a year earlier. Consumer investment assets rose 41% to
$346 billion, reflecting client inflows and market appreciation.
Aside from better credit quality experience, low rates are expected
to weigh on results in this segment in 2021.
In Global Wealth and Investment Management, pretax income
rose 59% to $1.3 billion. Revenues increased 14%, reflecting
higher AUM fees. Operating expenses were up 10%, and the
segment pretax margin rose to 26% from 19%. Client balances
rose 25% to $3.1 trillion, aided by market appreciation and
inflows. We expect BAC's focus on this segment to lead to stronger,
less volatile earnings going forward, with continued improvement
in the pretax margin.
In Global Banking, pretax income more than tripled to $3.3
billion from $996 million. Revenue was flat at $5.1 billion, with
results benefiting from an $831 million loan loss reversal, versus a
provision of $1.9 billion.
In Global Markets, pretax income declined 52%, to $1.2
billion, as lower FICC revenues offset higher equities revenues, and
operating expenses increased 29%.
For 2021, we look for 3% growth in revenues, as flat loan
balances and net interest margin contraction is offset by continued
healthy capital markets revenue. We expect loss provisions to
decline sharply as the macro environment improves. We also expect

Growth & Valuation Analysis Financial & Risk Analysis

GROWTH ANALYSIS
($ in Millions, except per share data) 2016 2017 2018 2019 2020
FINANCIAL STRENGTH 2018 2019 2020
Revenue 83,701 87,126 91,020 91,244 86,266
Cash ($ in Millions) 184,898 168,667 387,009
COGS — — — — —
Working Capital ($ in Millions) — — —
Gross Profit — — — — —
Current Ratio — — —
SG&A 47,270 46,365 45,075 46,715 46,378
LT Debt/Equity Ratio (%) 94.4 99.8 105.8
R&D — — — — —
Total Debt/Equity Ratio (%) 102.7 109.8 113.6
Operating Income — — — — —
Interest Expense -41,096 -45,239 -48,162 -48,891 -43,360 RATIOS (%)
Pretax Income 25,021 29,213 34,584 32,754 18,995 Gross Profit Margin — — —
Income Taxes 7,199 10,981 6,437 5,324 1,101 Operating Margin — — —
Tax Rate (%) 29 38 19 16 6 Net Margin 29.3 28.5 19.1
Net Income 17,822 18,232 28,147 27,430 17,894 Return On Assets 1.2 1.1 0.6
Diluted Shares Outstanding 11,047 10,778 10,237 9,443 8,797 Return On Equity 10.9 10.7 6.7
EPS 1.49 1.56 2.61 2.75 1.87
RISK ANALYSIS
Dividend 0.25 0.39 0.54 0.66 0.72
Cash Cycle (days) — — —
GROWTH RATES (%) Cash Flow/Cap Ex — — —
Revenue 0.9 4.1 4.5 0.2 -5.5 Oper. Income/Int. Exp. (ratio) — — —
Operating Income — — — — — Payout Ratio 19.7 24.2 23.3
Net Income 12.0 2.3 54.4 -2.5 -34.8
EPS 13.7 4.7 67.3 5.4 -32.0 The data contained on this page of this report has been
Dividend 25.0 56.0 38.5 22.2 9.1 provided by Morningstar, Inc. (© 2021 Morningstar, Inc.
Sustainable Growth Rate 5.2 6.1 6.7 8.3 4.7 All Rights Reserved). This data (1) is proprietary to
VALUATION ANALYSIS Morningstar and/or its content providers; (2) may not be
Price: High $23.39 $30.03 $33.05 $35.72 $35.67 copied or distributed; and (3) is not warranted to be
Price: Low $10.99 $22.01 $22.66 $24.01 $17.95 accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or
Price/Sales: High-Low 3.1 - 1.5 3.7 - 2.7 3.7 - 2.5 3.7 - 2.5 3.6 - 1.8
losses arising from any use of this information. Past
P/E: High-Low 15.7 - 7.4 19.3 - 14.1 12.7 - 8.7 13.0 - 8.7 19.1 - 9.6
performance is no guarantee of future results. This data
Price/Cash Flow: High-Low 8.2 - 3.8 36.1 - 26.5 7.3 - 5.0 —-— 7.4 - 3.7 is set forth herein for historical reference only and is not
necessarily used in Argus’ analysis of the stock set forth
on this page of this report or any other stock or other
security. All earnings figures are in GAAP.

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©2021 Argus Research Company Argus Analyst Report

 NYSE: BAC

BANK OF AMERICA CORP Report created Jul 14, 2021 Page 3 OF 5

Analyst's Notes...Continued
low single-digit growth in operating expenses, leading to a 71%
rebound in EPS.
Based mostly on a better credit quality outlook and lower loss
provision expectations, we are raising our 2021 EPS estimate to
$3.05 from $2.76, and our 2022 forecast to $3.08 from $3.00.
FINANCIAL STRENGTH & DIVIDEND
Our financial strength rating on BAC is Medium-High. The
company has been building capital in recent years through asset
sales and intentional run-off, and through the reduction of legacy
exposures in its investment banking business.
Based on the 2021 Federal Reserve CCAR results, the company
said it would be subject to a preliminary 2.5% stress capital buffer
(SCB), unchanged from the current level. In April 2021, BAC
announced a plan to repurchase up to $25 billion of common stock
over time, and following CCAR results said it planned to increase
its common stock dividend by 17% to $0.21 beginning in 3Q21.
Our dividend estimates are $0.78 for 2021 and $0.88 for 2022.
The company's Tier 1 ratio under the Basel III Advanced
Approach (fully phased-in) was 13.0% as of June 30, 2021.
MANAGEMENT & RISKS
Bank of America is led by Chairman and CEO Brian Moynihan,
who was elected to both posts amid calls to separate the positions.
Paul Donofrio is the CFO.
The company owns about $450 billion of U.S. consumer loans,
and is thus broadly exposed to the health of the U.S. economy and
housing market. Its total loan portfolio is about $1 trillion. With
regard to expenses, BofA spent heavily on legacy asset servicing
following the mortgage crisis, though these costs have fallen
steadily.
COMPANY DESCRIPTION
Bank of America is one of the largest financial companies in the
world. The company is primarily a U.S. retail and commercial
bank, with a network of more than 4,000 branches across much of
the country. The 2005 acquisition of MBNA made Bank of
America the nation's largest credit-card lender. As such, trends in
consumer interest rates, employment, income growth and
borrowing patterns represent a significant risk to the company's
earnings. The 2008 acquisition of Countrywide made BofA the
country's largest mortgage company as well. BofA became a
top-tier securities firm and retail broker with the acquisition of
Merrill Lynch.
VALUATION
BAC shares have traded between $23 and $43 over the past
year, and are currently near the upper end of that range. Earnings
in 2021 are expected to benefit from sharply lower credit costs
while capital markets businesses are expected to remain strong. We
note that earnings quality for the franchise had been improving
prior to the pandemic, and believe that recent investments will lead
to stronger underlying earnings power once the coronavirus impact
passes. Shareholder returns also improved meaningfully following

Peer & Industry Analysis

The graphics in this section are designed to
P/E
allow investors to compare BAC versus its Growth
industry peers, the broader sector, and the BAC vs.
market as a whole, as defined by the Argus Market
Universe of Coverage. 14 BAC vs.
Sector
• The scatterplot shows how BAC stacks More Value More Growth
up versus its peers on two key BAC
characteristics: long-term growth and Price/Sales
value. In general, companies in the lower 12
BAC vs.
left-hand corner are more value-oriented, Market
while those in the upper right-hand corner JPM BAC vs.
are more growth-oriented. Sector
10 More Value More Growth
• The table builds on the scatterplot by
displaying more financial information. Price/Book
• The bar charts on the right take the BAC vs.
analysis two steps further, by broadening Market
the comparison groups into the sector 8 C BAC vs.
level and the market as a whole. This tool Sector
is designed to help investors understand More Value More Growth

Value
P/E

how BAC might fit into or modify a PEG

9 10 11 12
diversified portfolio.
5-yr Growth Rate(%) BAC vs.
Market
5-yr Net 1-yr EPS BAC vs.
Market Cap Growth Current Margin Growth Argus Sector
More Value More Growth
Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating
JPM JPMorgan Chase & Co. 471,172 10.0 11.1 37.7 -11.8 BUY 5 Year Growth
BAC Bank Of America Corp. 341,573 9.5 13.1 24.1 1.0 BUY BAC vs.
C Citigroup Inc 141,324 11.0 7.9 19.6 -3.0 BUY Market
BAC vs.
Peer Average 318,023 10.2 10.7 27.1 -4.6 Sector
More Value More Growth

Debt/Capital
BAC vs.
Market
BAC vs.
Sector
More Value More Growth

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©2021 Argus Research Company Argus Analyst Report

 NYSE: BAC

BANK OF AMERICA CORP

Report created Jul 14, 2021 Page 4 OF 5

Analyst's Notes...Continued
2021 CCAR results.
With earnings in recovery from a poor 2020, we believe that
BAC shares, trading at about 12-times our revised 2021 EPS
estimate, remain attractively valued. Our target price of $44
assumes a multiple of 14-times our 2021 EPS estimate.
On July 14 at midday, BUY-rated BAC traded at $37.91, down
$1.95.

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©2021 Argus Research Company Argus Analyst Report

 NYSE: BAC

METHODOLOGY & DISCLAIMERS Report created Jul 14, 2021 Page 5 OF 5

About Argus
Argus Research, founded by Economist Harold Dorsey in 1934,
has built a top-down, fundamental system that is used by Argus
analysts. This six-point system includes Industry Analysis, Growth
Analysis, Financial Strength Analysis, Management Assessment,
Risk Analysis and Valuation Analysis.
Utilizing forecasts from Argus’ Economist, the Industry Analysis
identifies industries expected to perform well over the next
one-to-two years.
The Growth Analysis generates proprietary estimates for
companies under coverage.
In the Financial Strength Analysis, analysts study ratios to
understand profitability, liquidity and capital structure.
During the Management Assessment, analysts meet with and
familiarize themselves with the processes of corporate management
teams.
Quantitative trends and qualitative threats are assessed under
the Risk Analysis.
And finally, Argus’ Valuation Analysis model integrates a
historical ratio matrix, discounted cash flow modeling, and peer
comparison.
THE ARGUS RESEARCH RATING SYSTEM
Argus uses three ratings for stocks: BUY, HOLD, and SELL.
Stocks are rated relative to a benchmark, the S&P 500.
• A BUY-rated stock is expected to outperform the S&P 500 on
a risk-adjusted basis over a 12-month period. To make this
determination, Argus Analysts set target prices, use beta as the
measure of risk, and compare expected risk-adjusted stock
returns to the S&P 500 forecasts set by the Argus Market
Strategist.
• A HOLD-rated stock is expected to perform in line with the
S&P 500.
• A SELL-rated stock is expected to underperform the S&P 500.

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Morningstar Disclaimer
© 2021 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising
from any use of this information. Past performance is no guarantee of future results.

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