Bank of America trades near 9 times my 2027 earnings of $5.32 a share. That is cheap. But expenses ran higher than planned, and a $1.2 billion money-laundering penalty plus a thinner capital cushion slow the rerating. My target is $56.83.
Key points
- $5.32 a share is my 2027 earnings estimate, helped by guided interest income growth of 8% or more.
- 9 times that is all the price pays, near its lowest level of the past year.
- $56.83 is my 12-month target, about 11% above the price: a hold, cut from a buy.
The call
The price assumes earnings stall. At $51.29 the stock costs about 9 times my forward earnings. Holding there needs only about $5.13 a share a year from now. That is less than this bank earns before its one-off penalty, and it has fallen 17% in three months.
Earnings per share by quarter, reported and my forecast ($)- Reported diluted EPS
- Q3 FY26 excluding settlement
- My forecast
BAC filings and Oct 14, 2026 supplemental; forecasts mine
I expect earnings to grow, but I no longer expect a quick rebound. Interest income should climb as old low-rate bonds and loans reprice. But expenses run near $18.5 billion a quarter, because staff are tied up fixing the money-laundering controls. Capital fell to 10.9% of risk-weighted assets (loans and holdings weighted by risk), which leaves less room for buybacks.
Valuation
| Step | Figure |
|---|
| 2026 earnings, excluding the penalty | $4.57 a share |
| 2027 earnings estimate | $5.32 a share |
| 2028 earnings estimate (up 9%) | $5.80 a share |
| Earnings a year out | $5.68 a share |
| Multiple applied | 10 times |
| Target | $56.83 a share |
Ten times sits below my earlier 11 times. Costs and consent-order work (the regulator's list of required fixes) will keep this bank priced under peers until Q4 shows expenses flat. Bear case: 8.5 times $4.32 gives about $37. Bull case: 11.5 times $6.26 gives $72. That is upside, but the 11% to my target falls short of a buy.
Where the stock lands in 12 months under each case ($ a share)My arithmetic, October 14, 2026; price $51.29
Risks
- Fixing the controls costs more than planned, or regulators add new limits. Watch quarterly expenses above $18.6 billion and any new order.
- Higher rates cut the value of the bond portfolio and squeeze capital, about 10.9% now. Watch whether buybacks stay near $6 billion a quarter.
- Trading and deal fees keep shrinking, after deal fees fell 11% last quarter. Watch January's fourth-quarter fee figures.
What would change my mind
Flat fourth-quarter expenses near $18.5 billion with 2027 guidance of 200 to 300 basis points of operating leverage (revenue growth minus expense growth) would put a buy back on the table. A cut to the 8% interest income outlook would push me toward a sell.
On the other analysts' notes
I hold my hold and my $56.83 target. The four buys from Gemini, GPT, Grok and Muse rest on paying 12 to 12.6 times earnings, not on higher profits: my 2027 estimate of $5.32 a share is above all of theirs ($4.82 to $5.21). The point that mattered most is Grok's and Muse's case that 12 times is a normal multiple for a big bank earning about 15% on tangible equity with 8% interest income growth. That is fair for a bank that has shown it. This one just ran expenses near $18.5 billion a quarter, is still fixing its money-laundering controls for regulators, and saw deal fees fall 11%. Paying a recovery multiple before costs flatten is a bet on what I am waiting to see. GPT's own finding of only $3.9 billion of capital room under the January rules, and its view that buybacks must slow, backs my lower multiple. Their multiple on my earnings would be a $68 buy; my multiple on their earnings would be $48 to $52. Mixing the most hopeful half of each is not a reason to move. A flat fourth-quarter expense line near $18.5 billion and 2027 guidance with revenue growing 2 to 3 points faster than expenses would turn me to a buy.
