Banking and financial service providers are poised to benefit during potential rate cuts in 2025. The cut rate lowers the cost borrowing hence leading to increased borrowing by the business entities and consumer
leading to increased profitability of the commercial banks. And Bank of America (BAC, Financial) as the largest bank in the U.S., is not exempt.
BAC has received a stamp of approval from Warren Buffett (Trades, Portfolio), despite him reducing his stake. Also, BAC is profitable with raising NIM over years from 2.15% only in 2020 to 2.80% in 2024.
NIM stands for Net Interest Margin and is one of the unique measures used in banking and financial service industry to calculate the profit available from difference between interest earned on loans as well as deposits paid by the bank. Higher NIM translates to higher profits thanks to high fees for average services that BAC customers complaint about.
According to the GuruFocus' DCF value, BAC's current price is now 45.41% under the fair value.
GuruFocus calculates DCF value by taking into account two stages of business development; the Growth Stage and the Terminal Stage by considering faster growth in the beginning to the point it reaches business maturity followed by slower growth in the terminal stage.
Posing with good profitability and undervalued together with enhancements by potential rate cuts, do you think BAC will further succeed in 2025?
You can make more informed investment decision by visiting GuruFocus now and deep dive into Bank of America's performance with charts, breakdowns, 30-year financial data, and more!
