BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. BUY Sector: Financial Services Sub-Industry: Diversified Banks Source: S&P BUY RATING SINCE 05/11/2016 TARGET PRICE $26.75 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years TARGET PRICE $26.75 28 25 23 20 STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 47.79 32.95 15.12 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 2.36 1.35-1.95 Net Income 7.27 6.05 23.78 EPS 7.89 7.81 28.52 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2016 5.51 8.86 11.79 Q3 2015 5.52 9.74 12.91 Q3 2014 1.77 9.71 14.28 Rating History BUY HOLD BUY Volume in Millions 2015 2016 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 18 15 13 10 2,000 1,000 0 P/E COMPARISON RECOMMENDATION We rate () a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity. 16.78 EPS ANALYSIS¹ ($) 17.63 Ind Avg 26.02 S&P 500 HIGHLIGHTS Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.95% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Q1-0.05 Q2 0.19 Q3-0.04 2014 Q4 0.25 Q1 0.25 Q2 0.40 Q3 0.38 2015 NA = not available NM = not meaningful Q4 0.28 Q1 0.21 Q2 0.48 Q3 0.41 2016 1 Compustat fiscal year convention is used for all fundamental data items. has improved earnings per share by 7.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BANK OF AMERICA CORP increased its bottom line by earning $1.31 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($1.47 versus $1.31). The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Commercial Banks industry average. The net income increased by 7.3% when compared to the same quarter one year prior, going from $4,619.00 million to $4,955.00 million. Despite its growing revenue, the company underperformed as compared with the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. The gross profit margin for is currently very high, coming in at 86.45%. It has increased from the same quarter the previous year. Regardless of the results of the gross profit margin, the net profit margin of 20.60% trails the industry average. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -5% 15% TD UNFAVORABLE 30% BNS RY C HDB USB WFC JPM EBITDA Margin (TTM) FAVORABLE MTU 90% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $52.9 Billion and $315.6 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -5% 15% UNFAVORABLE LYG 1% HDB Earnings Yield (TTM) USB JPM WFC MTU FAVORABLE C TD BNS RY 11% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -4.9% and 14.6%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS Commercial Banking is a highly fragmented industry. We rate more than 300 publicly traded institutions, ranging from huge Wells Fargo (WFC) to tiny companies such as United Bancshares (UBSI). They compete in a broad market of over 9,000 commercial banks and savings institutions, insured by the Federal Deposit Insurance Corporation institutions. Historically, commercial banks made most of their profits by capturing the margin between interest paid to depositors and higher rates charged to borrowers. They also raise money by selling bonds and bundles of loans called asset-backed securities. Additional income is earned from deposit and loan fees, as well as securities underwriting, stock trading, and asset management. The banking industry set record profits in previous years before collapsing as real estate prices imploded. This resulted in asset-backed securities being impossible to mark-to-market when the market dried up and diminishing the apparent equity capital position of the banks. The industry was rescued by the U.S. government through direct injections of capital to more than 700 financial institutions under the Troubled Asset Relief Program, or TARP. In the financial crisis, 222 firms failed and were closed by the FDIC. In December 2009, 702 banks, accounting for $402.8 billion in total assets, were on the FDIC s problem bank list and risk being liquidated and sold to er banks. Legislation to strengthen financial industry regulation has been put in place to protect consumers from the worst practices of the credit card banks. Additional reforms designed to protect the industry from institutions from taking on excess leverage are being put in place to reduce systemic risk, regulate derivative financial products, and liquidate financial institutions formerly believed to be too-big-to-fail without a tax-payer bailout. The recovering economy and the new financial reforms serve to return confidence to the commercial banking group. PEER GROUP: Commercial Banks Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 23.16 247,517 16.78 93,525.00 16,546.00 TD TORONTO DOMINION BANK 49.84 92,582 10.65 38,490.00 8,821.00 MTU MITSUBISHI UFJ FINANCIAL GRP 6.50 92,098 10.66 51,628.46 8,307.32 BNS BANK OF NOVA SCOTIA 57.34 69,261 9.94 34,295.00 7,117.00 LYG LLOYDS BANKING GROUP PLC 3.20 57,099 64.00 33,634.82 1,541.78 HDB HDFC BANK LTD 62.16 52,898 25.06 11,963.94 2,091.05 JPM JPMORGAN CHASE & CO 86.00 315,580 14.83 103,698.00 23,440.00 WFC WELLS FARGO & CO 55.19 291,949 13.69 92,908.00 22,239.00 C CITIGROUP INC 60.23 180,287 12.98 83,634.00 14,674.00 RY ROYAL BANK OF CANADA 68.56 102,126 10.13 46,150.00 10,405.00 USB U S BANCORP 51.98 102,089 16.09 22,435.00 5,886.00 The peer group comparison is based on Major Diversified Banks companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates through five segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, Global Markets, and Legacy Assets & Servicing. The Consumer Banking segment offers traditional and money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, and investment accounts and products, as well as credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans. This segment provides its products and services through approximately 4,700 financial centers, 16,000 ATMs, call centers, and online and mobile platforms. The Global Wealth & Investment Management segment offers investment management, brokerage, banking, and retirement products, as well as wealth management and customized solutions. The Global Banking segment provides lending products and services, including commercial loans, leases, commitment facilities, trade finance, real estate lending, and asset-based lending; treasury solutions, such as treasury management, foreign exchange, and short-term investing options; working capital management solutions; and debt and equity underwriting and distribution, and merger-related and other advisory services. The Global Markets segment offers market-making, financing, securities clearing, settlement, and custody services, as well as risk management, foreign exchange, fixed-income, and mortgage-related products. The Legacy Assets & Servicing segment engages in mortgage servicing activities related to residential first mortgage and home equity loans; and managing legacy exposures related to mortgage origination, sales, and servicing. Bank of America Corporation was founded in 1874 and is based in Charlotte, North Carolina. Bank of America Corporate Center Charlotte, NC 28255 USA Phone: 704-386-5681 http://www.bankofamerica.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. Total Return 5.0 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 90% of the companies we cover. Efficiency 3.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 50% of the companies we review. Price volatility 4.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 70% of the stocks we monitor. Solvency 3.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 50% of the companies we analyze. Income 3.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 60% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2016 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. During the same period, stockholders' equity ("net worth") has increased by 5.54% from the same quarter last year. 0.38 Q4 FY16 1.47 E 2016(E) 1.62 E 2017(E) STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. INCOME STATEMENT Net Sales ($mil) 24,044.00 23,488.00 EBITDA ($mil) 11,633.00 10,830.00 EBIT ($mil) 11,069.00 10,235.00 Net Income ($mil) 4,955.00 4,619.00 BALANCE SHEET Cash & Equiv. ($mil) 370,750.00 383,592.00 Total Assets ($mil) 2,195,314.00 2,153,006.00 Total Debt ($mil) 430,220.00 471,044.00 Equity ($mil) 270,083.00 255,905.00 PROFITABILITY Gross Profit Margin 86.45% 85.94% EBITDA Margin 48.38% 46.10% Operating Margin 46.04% 43.58% Sales Turnover 0.04 0.04 Return on Assets 0.75% 0.72% Return on Equity 5.51% 5.52% DEBT Current Ratio NA NA Debt/Capital 0.61 0.65 Interest Expense NA NA Interest Coverage NA NA SHARE DATA Shares outstanding (mil) 10,124 10,427 Div / share 0.08 0.05 EPS 0.41 0.38 Book value / share 26.68 24.54 Institutional Own % NA NA Avg Daily Volume 115,411,322 91,146,601 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 5/11/2016. As of 12/15/2016, the stock was trading at a price of which is 1.0% below its 52-week high of $23.39 and 110.7% above its 52-week low of $10.99. 2 Year Chart BUY: $16.85 2015 HOLD: $12.13 BUY: $14.20 $25 $20 $15 MOST RECENT RATINGS CHANGES Date Price Action From To 5/11/16 $14.20 Upgrade Hold Buy 2/24/16 $12.13 Downgrade Buy Hold 12/15/14 $16.85 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/15/2016) 41.16% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.81% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 28.03% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of 17.63 for the Commercial Banks industry and a discount compared to the S&P 500 average of 26.02. Conducting a second comparison, its price-to-book ratio of 0.87 indicates a significant discount versus the S&P 500 average of 2.88 and a discount versus the industry average of 1.21. The current price-to-sales ratio is well above the S&P 500 average, but below the industry average. Upon assessment of these and other key valuation criteria, BANK OF AMERICA CORP proves to trade at a discount to investment alternatives within the industry. Price/Earnings 16.78 Peers 17.63 Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation. is trading at a valuation on par with its peers. Price/Projected Earnings 14.31 Peers 14.72 Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations. is trading at a valuation on par with its peers. Price/Book 0.87 Peers 1.21 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 2.51 Peers 2.96 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 7.31 Peers 12.32 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth 1.37 Peers 2.47 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 7.81 Peers -39.77 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher 1.35 Peers 5.41 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5