Does BAC Stock Deserve a Spot in Your Portfolio Ahead of Q3 Earnings?

One of the biggest banks in the United States, Bank of America BAC, is scheduled to announce third-quarter 2025 results on Oct. 15 before the opening bell.

Bank of America’s first-half 2025 performance was decent, driven by impressive trading and growth in net interest income (NII), while the investment banking (IB) business was subdued. This time, the company’s performance is likely to have been robust. The Zacks Consensus Estimate for revenues of $27.12 billion suggests 7% year-over-year growth. 

In the past seven days, the consensus estimate for earnings for the to-be-reported quarter has been revised 1.1% lower to 94 cents. This indicates a 16.1% jump from the prior-year quarter, as higher NII and solid trading and IB business are likely to have supported BAC’s bottom-line growth. 

Estimate Revision Trend 
 

Bank of America has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with the average beat being 6.24%. 

BAC’s Earnings Surprise History
 

Factors Influencing Bank of America’s Q3 Results

NII: In the third quarter, the Federal Reserve lowered interest rates by 25 basis points to 4.00-4.25%. However, this is less likely to have hurt Bank of America’s NII as it occurred toward the end of the third quarter. With rates remaining relatively unchanged for most of the quarter, funding/deposit costs are expected to have been stable. 

Also, the overall lending scenario was impressive. Per the Fed’s latest data, the demand for commercial and industrial loans was robust in the to-be-reported quarter, while real estate and consumer loan demand was modest. Hence, BAC is expected to have witnessed a decent rise in loan demand. Likewise, its peers, JPMorgan JPM and Citigroup C, are likely to have recorded a modest loan demand. 

BAC expects NII (fully tax equivalent) to grow sequentially in the quarter and be around $15.2 billion. The Zacks Consensus Estimate for NII of $15.22 billion suggests a 7.9% year-over-year increase. Our estimate for NII is $15.29 billion. 

IB Fees: Global mergers and acquisitions (M&As) in the third quarter of 2025 rebounded solidly from the lows witnessed in April and May following President Trump’s announcement of ‘Liberation Day’ tariff plans. As corporates adapted to the rapidly changing geopolitical and macroeconomic scenarios, M&A deals resumed. So, Bank of America’s advisory fees are likely to have recorded a decent improvement.

Further, the IPO market performance was impressive during the to-be-reported quarter, with an increase in both the number of IPOs and the amount of capital raised driven by strategic tariff pauses and positive economic data. Also, global bond issuance volume was decent. So, BAC’s underwriting fees (accounting for almost 40% of total IB fees) are expected to have increased during the to-be-reported quarter.

Management expects IB fees to increase in the 10-15% range on a year-over-year basis.

The Zacks Consensus Estimate for IB income of $1.62 billion indicates growth of 4.7% from the prior-year quarter. We expect IB income to be $1.59 billion.

Trading Income: Client activity and market volatility were strong in the third quarter. The uncertainty over the impact of tariffs on the U.S. economy and changes in the Fed’s monetary policy drove client activity. Volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, BAC is likely to have recorded a solid performance in trading revenues this time.

Driven by heightened market volatility and a rise in client activity, the company projects revenues in the Global Markets segment to rise in the mid-single digits year over year in the third quarter of 2025. 

The Zacks Consensus Estimate for total sales and trading revenues of $5.23 billion suggests a 6% rise on a year-over-year basis. Our estimate for the metric is the same as the consensus estimate. 

Expenses: While Bank of America managed expenses prudently in the past, expansion into new markets by opening financial centers and efforts to digitize operations and upgrade existing financial centers are expected to have kept non-interest expenses elevated in the to-be-reported quarter.

Management anticipates non-interest expenses to be nearly $17.3 billion for the third quarter. Our estimate for the metric is $17.29 billion, suggesting a 4.9% year-over-year increase. 

Asset Quality: Bank of America is less likely to have set aside a massive amount of money for potential delinquent loans, given the expectations of two more interest rate cuts this year amid the impact of Trump’s tariffs on inflation and the labor market. Our estimate for provision for credit losses is pegged at $1.58 billion. 

The Zacks Consensus Estimate for non-performing loans (NPLs) of $6.66 billion implies an 18.3% jump from the prior-year quarter. Also, the consensus estimate for non-performing assets (NPAs) of $6.66 billion suggests a 14.4% rise. Our estimates for NPLs and NPAs are pegged at $6.13 billion and $6.31 billion, respectively.

What Our Model Unveils About Bank of America’s Q3 Earnings

Our proven model predicts an earnings beat for Bank of America this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below. 

Bank of America has an Earnings ESP of +1.34%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

It carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

BAC’s Price Performance & Valuation Analysis

In the third quarter, BAC shares gained 9%, underperforming the S&P 500 Index. In the same time frame, shares of JPMorgan and Citigroup rallied 8.8% and 19.2%, respectively.

3Q25 BAC Price Performance 
 

JPMorgan and Citigroup are slated to report quarterly numbers on Oct. 14. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Let’s check out the value Bank of America offers investors at current levels. The stock is trading at a 12-month trailing price-to-tangible book (P/TB) of 1.80X. This is below the industry’s 2.91X. This shows that the stock is currently inexpensive. 

Price-to-Tangible Book (TTM) 
 

Further, BAC stock is trading at a discount compared with JPMorgan, which has a P/TB of 3.94X. On the other hand, Citigroup has a P/TB of 1.03X, making it inexpensive compared with Bank of America.

To Buy or Not to Buy BAC Shares Before Q3 Earnings

The interest rate pressure that Bank of America has faced since 2023 has subsided to a great extent, and risks surrounding deposit outflows have abated. Also, the industry-wide lending scenario is expected to be strong, and the company is anticipated to gain from it.  

The company’s aggressive branch expansion across the United States as part of a broader strategy to solidify customer relationships and tap into new markets will drive NII growth over time. This will also help capitalize on cross-selling opportunities. Further, it spends $13 billion annually on technology, of which almost $4 billion will be utilized for new technology initiatives this year. 

However, BAC is expected to be adversely impacted by Fed rate cuts, with the NII growth pace likely to slow down. Also, the volatile nature of the capital markets business will likely make fee income growth a challenge. Mounting operating expenses and weak asset quality are other headwinds. 

While Bank of America's prospects remain promising, investors should not rush to buy the stock. Those interested in adding it to their portfolios might be better off waiting until after the release of quarterly numbers to gain clarity on the impact of the monetary policy change on its business and a potentially attractive entry point. Those who already have BAC stock in their portfolio can hold on to it because it is less likely to disappoint over the long term. 

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

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