BAC's Liquidity Cushion: A Green Light for Solid Capital Return Plans?

Bank of America BAC enjoys a strong liquidity position. As of June 30, 2025, cash and cash equivalents were $266 billion. As of the same date, total debt was $760.8 billion. Out of this, only $47.9 billion were near-term borrowings. 

Additionally, BAC maintains investment-grade long-term credit ratings of A1, A- and AA- from Moody’s, S&P Global Ratings and Fitch Ratings, respectively, and a stable outlook. Further, the company’s diversified, digitally enabled business model and structural deposit advantage underpin resilient earnings and enable robust capital returns. 

Hence, the company’s enhanced capital return plan received the green light from the Federal Reserve following this year’s stress test. Also, effective Oct. 1, its preliminary stress capital buffer (SCB) will decline to 2.5% from 3.2%, a meaningful improvement for a systemically important financial institution like Bank of America. The reduction strengthens flexibility by lowering the capital the bank must retain under adverse conditions.

As such, Bank of America launched a $40 billion share repurchase plan (became effective Aug. 1) and raised its quarterly dividend by 8% to 28 cents per share. In the past five years, the company increased its dividends five times at an annualized growth rate of 8.72%. Additionally, BAC intends to buy back shares worth nearly $4.5 billion every quarter in the near term.

With robust liquidity, a strong capital base and reduced SCB, Bank of America is well-positioned to sustain higher dividends and aggressive share repurchases.

How Is BAC Placed in Terms of Liquidity Compared With Peers?

Bank of America’s two close peers are JPMorgan JPM and Citigroup C.

Like BAC, JPMorgan has a robust liquidity position. As of June 30, 2025, the bank had a total debt of $485.1 billion (the majority of this is long-term in nature). Its cash and due from banks and deposits with banks were $420.3 billion on the same date. Hence, the company continues to reward shareholders handsomely. 

Following the clearance of the 2025 stress test, JPMorgan authorized a new share repurchase program worth $50 billion, which became effective July 1. Also, the company intends to raise its quarterly dividend by 7% to $1.50 per share. 

Similarly, Citigroup boasts of a solid liquidity position. As of June 30, 2025, its cash and due from banks and total investments aggregated to $474.4 billion, while its total debt (short-term and long-term borrowing) was $373.3 billion. This helps the company focus on enhancing capital distribution activities.

Post-clearing the 2025 Fed stress test, the company hiked its dividend 7% to 60 cents per share. In January, Citigroup's board of directors approved a $20 billion common stock repurchase program with no expiration date. As of June 30, 2025, $16.3 billion worth of authorization remained available.

BAC’s Price Performance, Valuation and Estimates

Shares of Bank of America have rallied 6.8% this year. In the same time frame, JPMorgan has gained 21.1%, and Citigroup soared 33.1%.

YTD Price Performance
 

From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.73X, below the industry. 

P/TB Ratio
 

Moreover, the Zacks Consensus Estimate for Bank of America’s 2025 and 2026 earnings implies year-over-year growth of 12.2% and 16.2%, respectively. In the past month, earnings estimates for 2025 have moved marginally upward, while 2026 estimates have remained unchanged.

Earnings Estimates
 

BAC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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