Bank of America Stock Slides as Firm Holds First Investor Day in 14 Years

Brian Moynihan, chief executive officer of Bank of America, has seen his bank’s share price lag behind rivals’. (Betty Laura Zapata/Bloomberg)

Bank of America raised several financial targets Wednesday as CEO Brian Moynihan and his leadership team gathered in Boston’s Back Bay to address investors and Wall Street analysts at their first investor day since 2011.

The second largest U.S. bank said it is now targeting a return on tangible common equity—which stood at 15.4% in the third quarter—between 16% and 18% over the next three to five years, up from management’s earlier guidance in the mid-teens.

Investors had expected an increase in that range. But the stock was still sliding on the news, down 1.7% in midday trading as the S&P 500 rose 0.7%.

UBS analyst Erika Najarian said while that target was in-line with expectations, there was “early rumbling from investors” on the timeframe the bank provided.

At JPMorgan Chase, the firm’s larger rival, the same equity return figure stood at 20% in the third quarter.

Bank of America is aiming to sell a message to investors: Our strategy and stock are worth buying after years of trailing rivals.

The firm outlined profitability and efficiency measures, gave an update on a portfolio of fixed-rate assets that has dragged on performance, and confirmed expectations for a key credit quality gauge.

In addition to the return target, the bank said it’s aiming to improve its efficiency ratio—a profitability measure showing how it manages expenses while generating revenue—to a range between 55% and 59%, from 62% in the third quarter. And it seeks a net charge-off rate of 0.5% to 0.55% through the cycle.

It also expects net interest income, a core revenue driver, to increase at a compound annual growth rate of 5% to 7% over the next five years as a result of organic growth and shifts across its fixed-rate assets. And it seeks a net charge-off rate of 0.5% to 0.55% through the cycle. Charge-offs represent a closely watched sign of credit quality.

Bank of America’s low-yielding securities have drawn investor criticism in recent years. Early in the pandemic, when the Federal Reserve cut interest rates in an effort to cushion the U.S. economy, the bank invested $500 billion in U.S. agency mortgage securities yielding 2%. Those assets have weighed on the firm’s net interest margin.

Now, as part of its updates Wednesday, Bank of America said $450 billion to $490 billion of its low-yielding assets will be reinvested at higher rates between 2026 and 2031 and benefit the firm’s performance.

That so-called repricing is “essentially a built-in earnings lift” that should drive better per-share earnings growth in the next two to three years, Deutsche Bank analyst Matt O’Connor wrote to clients.

The investor day has been highly anticipated since Bank of America announced it three months ago, and the stakes are high. Its shares have lagged those of rivals such as JPMorgan Chase , Wells Fargo , and Goldman Sachs as its performance ethos, often touted by management as “responsible growth,” has left investors wanting more.

At the day-long event Wednesday, top executives across business lines are set to make their case that the bank is set to ramp up growth. Wells Fargo analyst Mike Mayo wrote to clients that the event could turn into a “sell-the-news event” as the stock has rallied ahead of the investor day.

In the long run, though, the stock “should follow earnings and returns,” Mayo wrote, which “both seem to be heading higher [with] a better degree of certainty.”

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com