The decline in energy prices has impacted all financial institutions, however, the one of most concern is Bank of America. It is estimated the bank has $21.3 billion in exposure to the Commodities market in the form of loans to energy companies. The CFO indicated in the last earnings call that falling oil prices represented a concern going into 2016. As with all other financial institutions, Bank of America’s margins have suffered as a result of the extended low interest rate period. Additionally, trading revenues at the major U.S banks are expected to show a year-on-year decline of almost 30%. Bank of America shares have fallen 19% year to date.
Investor Notes:
- Earnings are expected to fall to $0.22 per share, down from $0.27 in Q1 of 2015, representing a 19% drop year-on-year.
- Earnings estimates for the quarter have been revised downwards 11 times in the last 30 days.
- Revenue for the quarter is set to fall by 5% from $21.42 billion for first quarter of 2015 to $20.33 billion for the first quarter of 2016.
- Bank of America underperformed the S&P 500 by 25.8% and outperformed the sector by almost 70%.
- Price action remains below both 50 day and 200 day moving average (MA), with price crossing the 200MA in mid- January indicating the trend is downwards.
