How Does Bank of America Plan to Achieve ROTCE Target of 16-18%?

Bank of America BAC unveiled a new medium-term return on tangible common equity (ROTCE) target of 16-18% during its Investor Day conference. The bank’s pursuit of reaching the ROTCE target forms a clear, credible investment case anchored in revenue expansion, operating discipline and stronger client engagement. 

Management is targeting 5-7% organic net interest income expansion, underpinned by steady mid-single-digit loan and deposit growth across the franchise. A major earnings catalyst is the Global Corporate & Investment Banking segment, where BAC aims to gain 50-100 basis points of fee market share through tighter integration with corporate banking and deeper penetration into the middle market. 

Key growth engines, including middle-market banking, global banking and wealth/private banking, are benefiting from expanded local coverage, new financial centers in fast-growing geographies and improved cross-sell across platforms.

Efficiency remains a central pillar. Bank of America plans to sustain a 55-59% efficiency ratio, supported by more than $4 billion in annual technology investments that automate processes, enhance digital adoption and generate operating leverage. With 79% of clients now digitally engaged, the bank’s AI and data-driven initiatives are improving personalization, risk oversight and overall productivity, helping structurally lift returns.

At the same time, BAC maintains strong capital discipline with a consistent 10.5% CET1 ratio and a risk framework built to withstand regulatory or macro pressures. While execution risks persist, most notably around economic assumptions, technology transformation, cost control and competitive dynamics, the overall strategic roadmap remains coherent, scalable and achievable.

ROTCE Targets of Bank of America’s Peers

JPMorgan JPM consistently targets a ROTCE of 17% through the economic cycle. In reality, the firm has often surpassed this, reporting ROTCE in the 20% range in recent quarters. The 17% target is described as an “outcome, not a constraint,” and reflects their long-term view of sustainable, through-cycle profitability. JPMorgan emphasizes robust capital returns, cost discipline and leading market share in its global franchises as the pillars supporting this high ROTCE.

Citigroup’s C current medium-term ROTCE target is 10-11% by 2026. This target is explicitly positioned as a “waypoint, not the final destination”, reflecting ongoing transformation and operational restructuring. Citigroup’s plan focuses on cost-cutting, simplifying global operations, decommissioning legacy systems and investing in growth in higher-ROTE segments such as Treasury & Trade Solutions. 

Therefore, JPMorgan is leveraging scale, cost control and business mix to maintain its higher ROTCE target. On the other hand, Citigroup’s lower ROTCE target is the result of ongoing transformation and a structurally different revenue/expense mix, but management signals ambition to catch up.

Bank of America’s Price Performance, Valuation & Estimates

Shares of Bank of America have risen 17.1% this year. 

From a valuation standpoint, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) of 1.88X, below the industry. 

The Zacks Consensus Estimate for Bank of America’s 2025 and 2026 earnings implies year-over-year growth of 15.9% and 14.5%, respectively. In the past week, earnings estimates for 2025 and 2026 have increased to $3.80 and $4.35, respectively.

Bank of America currently carries a Zacks Rank #2 (Buy). 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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