Bank of America Has a Game Plan to Catch Up to Its Peers. It’s Time to Buy the Stock.

Bank of America CEO Brian Moynihan (Anna Moneymaker/Getty Images)

“The forgotten Goliath” of the big banks is serious about shedding its reputation as an underachiever. CEO Brian Moynihan’s future may depend on it.

BAC

Bank of America Corp.

1-Year Price Chart

Created with Highstock 2.1.8

$53.03

as of market close October 30, 2025

Market Cap

$393 B

NTM P/E

12.5

Div Yield

2.1%

Beta

1.11

52 Week Range

$33.07

$53.44

Key Points

• Bank of America’s upcoming investor day will likely focus on growth and returns, with a target Return on Tangible Common Equity of 16% to 18%.
• The bank’s stock has risen 21% this year, but it lags behind JPMorgan Chase’s 29% gain, reflecting lower returns.
• Bank of America aims to improve its performance, despite past issues like a timid growth strategy and a $71 billion paper loss on mortgage securities.

Bank of America needs to up its game—and the banking giant is likely to unveil a blueprint for doing just that at its first investor day in nearly 15 years. It’s time to consider making a deposit in BofA stock.

Bank of America will be holding an all-day investor event in Boston this coming Wednesday, and it will give investors a chance to hear from longtime CEO Brian Moynihan, newly appointed co-presidents Dean Athanasia and Jim DeMare, and other members of the leadership team.

The focus probably will be on growth and returns. While BofA stock has risen 21% this year, it lags behind rival JPMorgan Chase, which has gained 29%—a reflection, in part, of its lower returns, as measured by return on tangible common equity, or ROTCE. Moynihan looks set to outline how he hopes to close the gap on that key metric. The bank is likely to set a ROTCE target in the 16% to 18% range, up from the 14% so far this year and closer to JPMorgan’s 21% return.

It’s a challenging task, but with one of the better earnings stories among top banks, the least-risky loan portfolio, and initiatives to boost returns, the bank has a good shot at hitting that target.

“I expect higher growth, returns, and earnings,” says Mike Mayo, the banking analyst at Wells Fargo Securities, who expects earnings growth of 13% next year to $4.35 a share before it rises as high as $6 a share in coming years. “The question is not if, but when.” He recently boosted his price target on Bank of America stock to $62 from $60, up 17% from a recent $53.

Bank of America has a lot going for it. The company has one of the best franchises in banking, including the No. 2 consumer bank behind JPMorgan, a top five investment bank, and a leading wealth management arm led by Merrill Lynch. It’s also a banking technology leader with the best virtual financial assistant in Erica, which has two million interactions a day with banking customers.

The bank has also left a lot on the table. It’s useful to compare it with JPMorgan, since the two companies have a similar business mix involving consumer banking, wealth management, commercial banking, investment banking, and trading. Since 2019, BofA’s earnings are up by a third based on 2025 projections, while JPMorgan’s have nearly doubled.

What’s the problem? Mayo thinks the bank has been too timid, something that is reflected in the Federal Reserve’s stress tests, with Bank of America showing the lowest losses relative to Citigroup, JPMorgan, and Wells Fargo in a downturn, thanks to the high credit quality of the bank’s $1.2 trillion loan portfolio. But if Moynihan’s mantra has been “responsible growth,” Mayo thinks it should pivot to “more growth” while maintaining appropriate safeguards.

BofA’s credit-card loan portfolio, for instance, has been little changed over the past decade while JPMorgan and Capital One Financial have nearly doubled theirs. BofA hasn’t chased co-branded credit-card deals as much as rivals.

Its wealth management business has also lost some of its luster. Merrill Lynch used to be the dominant retail brokerage platform, but the business that was once known as the “Thundering Herd” for its bullish stance on America isn’t making as much noise currently. Morgan Stanley now is the industry champ based on revenue, profits, and margins.

Over the past five years, Bank of America’s wealth management revenue growth averaged 4% a year, against 8% for Morgan Stanley. Revenue growth did pick up to 8% this year. BofA’s margins of 24% so far in 2025 were below Morgan Stanley’s 29%. Morgan Stanley also has a better alternative-asset platform.

It hasn’t helped investor sentiment that Berkshire Hathaway has steadily reduced its big stake in BofA by 40% since July 2024 to about 605 million shares, which are now worth over $30 billion. Berkshire CEO Warren Buffett hasn’t said why he has reduced the stake, but he has soured on banks generally in the past five years, eliminating once-sizable holdings in Wells Fargo, Goldman Sachs Group, JPMorgan, and Citigroup.

Created with Highcharts 9.0.1Bank of America(BAC / NYSE)Source: FactSet

Created with Highcharts 9.0.12023'24'25253035404550$55

Bank of America has also faced investor scrutiny over its poor decision to invest $500 billion in 2% U.S. agency mortgage securities at a historic low in rates, mostly in 2020 and 2021. That move has led to paper losses that stood at $71 billion on Sept. 30 and dampened the bank’s interest margin as rates rose. Mayo calls that “one of the worst mistakes under Moynihan’s tenure,” but, thankfully for the bank, accounting rules don’t require the loss to be recognized in its capital position.

The good news is that the mortgage securities portfolio is slowly maturing, and that allows the bank to reinvest about $10 billion per quarter at yields that are two to three percentage points higher, helping to bolster its interest margin. The bank sees higher net interest income and margins in 2026.

Some of the bank’s efforts have already started to pay off, with its third-quarter report showing a 31% gain in earnings to $1.06 a share. Bank of America pays a 2% dividend yield, in line with peers, and supplements that with about $20 billion annually in stock buybacks, for a total yield—dividends plus buybacks—of 7%. Mayo sees the possibility of even more share repurchases in the next two years.

The investor day is also a chance for Moynihan, 66, to argue for more time as the head of the company. He wants to stay until the end of the decade, emulating JPMorgan CEO Jamie Dimon, 69, who plans to remain at the helm for a few more years. Dimon deserves to stay, given the bank’s superior performance and his industry stature; Moynihan’s bid is less convincing, in light of the bank’s mediocre showing. BofA stock has lagged behind shares of Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo over the past five years.

Moynihan’s efforts may depend on how well his investor day plan is received—and executed. He needs to turn the bank’s performance from good to great to match peers, and there is the near-term risk that investors sell the stock on the investor day news since Wall Street is already anticipating good news. Still, at just 12.5 times 12-month forward earnings—below JPMorgan, Wells Fargo, Goldman Sachs, and Morgan Stanley—there’s room for the stock to run if Moynihan gets it right.

Mayo calls Bank of America the “forgotten Goliath” among the country’s top banks. Moynihan has the chance to shed that label, deliver for investors, and keep the top job until 2030.

Write to Andrew Bary at andrew.bary@barrons.com