Do Bank of America (BAC) and Goldman Sachs (GS) Hold Promise for Investors?

NYSE: BAC | Bank of America Corp. News, Ratings, and Charts

BAC – Although the U.S. banking industry has staged a strong recovery from last year’s troubles, certain risks still cloud its growth prospects this year. Given this backdrop, should investors now consider buying Bank of America (BAC) and The Goldman Sachs Group (GS)? Keep reading…

Despite last year’s challenges, the U.S. banking industry’s outlook for 2024 looks stable. Although expectations of lower interest rates this year have buoyed the sector’s outlook, challenges remain, including deteriorating asset quality, slowing loan growth, the potential for default on commercial real estate (CRE) loans, and lower net interest margins.

Amid this uncertainty, investors could wait for better entry points in Bank of America Corporation (BAC) and The Goldman Sachs Group, Inc. (GS). Before diving deeper into these stocks’ fundamentals, let’s discuss what’s going on in the banking industry.

Last year, banks faced challenges such as deposit withdrawals, higher deposit expenses, credit rating downgrades, and increased funding costs. However, the banking sector has rebounded from the setbacks, demonstrating improved stability, a positive performance outlook, and opportunities for capital growth.

Banks are anticipated to sustain good profitability, aiming for a return on common equity between 10% and 11%. Moreover, dealmaking is showing signs of a revival.

The Federal Reserve’s expected rate cuts this year will benefit banks. Lower interest rates can stimulate borrowing and investment and increase loan demand. They will also reduce banks’ borrowing expenses for loans and other operations. However, further deposit declines, funding cost pressures, and exposure to CRE loans will continue to be key risks for the U.S. banking sector.

Let’s assess the fundamentals of the two bank stocks.

Bank of America Corporation (BAC)

BAC provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide.

In terms of the trailing-12-month net income margin, BAC’s 28.15% is 19.3% higher than the 23.59% industry average. However, its 9.79% trailing-12-month Return on Common Equity is 10.7% lower than the 10.96% industry average. Also, its 0.83% trailing-12-month Return on Total Assets is 23.9% lower than the 1.10% industry average.

In the fiscal fourth quarter, which ended on December 31, 2023, BAC’s total revenue net of interest expense decreased 10.5% year-over-year to $21.96 billion. Its adjusted net income and EPS came in at $5.90 billion and $0.70, respectively. In addition, its cash and cash equivalents stood at $333.07 billion, up 44.8% compared to $230.20 billion as of December 31, 2022.

Street expects BAC’s EPS and revenue for the quarter ended March 31, 2024, to decrease 17.7% and 3.8% year-over-year to $0.77 and $25.26 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 37.6% to close the last trading session at $37.92.

BAC’s POWR Ratings reflect an uncertain outlook. It has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked first out of 9 stocks in the Money Center Banks industry. It has a C grade for Value, Momentum, Stability, and Quality. Click here to see BAC’s ratings for Growth and Sentiment.

The Goldman Sachs Group, Inc. (GS)

GS is a financial institution that provides various financial services for corporations, financial institutions, governments, and individuals worldwide. It operates through Global Banking & Markets, Asset & Wealth Management, and Platform Solutions segments.

On March 25, 2024, GS announced the launch of Eagle Capital Management’s first exchange-traded fund (ETF) through the GS’ ETF Accelerator platform. This marks the fifth ETF launched through the Accelerator and the first via separately managed account (SMA) conversion, catering to client demand and facilitating efficient entry into the booming ETF market.

In terms of the trailing-12-month gross profit margin, GS’s 83.16% is 40.1% higher than the 59.35% industry average. Its 5.12% trailing-12-month Capex / Sales is 159.4% higher than the industry average of 1.97%.

On the other hand, its 0.52% trailing-12-month Return on Total Assets is 52.6% lower than the industry average of 1.10%. Also, its 0.03x trailing-12-month asset turnover ratio is 86.1% lower than the industry average of 0.21x.

For the fiscal fourth quarter that ended December 31, 2023, GS’s total net revenues increased 6.8% from the year-ago value to $11.32 billion. The company’s net earnings applicable to common shareholders and earnings per common share stood at $1.87 and $5.48, respectively, up 57.6% and 65.1% over the prior-year quarter.

In addition, GS’s total liabilities as of December 31, 2023, came in at $1.53 trillion, compared to $1.44 trillion as of December 31, 2022.

Analysts expect GS’s revenue for the quarter ended March 31, 2024, to increase 6.7% year-over-year to $13.04 billion. Its EPS for the same quarter is expected to increase 1% year-over-year to $8.88. Over the past month, the stock has gained 6.2% to close the last trading session at $417.69.

GS’s bleak prospects are reflected in its POWR Ratings. It has an overall rating of C, which translates to Neutral in our proprietary rating system.

Within the Investment Brokerage industry, it is ranked #11 out of 20 stocks. It has a C grade for Growth, Value, Momentum, Stability, Sentiment, and Quality. Get all the GS ratings here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

BAC shares were trading at $37.65 per share on Monday morning, down $0.27 (-0.71%). Year-to-date, BAC has gained 12.61%, versus a 10.19% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
BACGet RatingGet RatingGet Rating
GSGet RatingGet RatingGet Rating

Most Popular Stories on

Will Stocks Continue to Rise...Or Time for Rug Pull?

It’s hard not to celebrate each new high for the S&P 500 (SPY). Yet with high inflation not dead and buried then perhaps this stock market celebration is a tad early. That is why you need to hear what 44 year investment veteran Steve Reitmeister is saying about what comes next for the stock market and how to stay on the right side of the action. Read on below for more...

4 Software Stocks Primed for Major Upside in 2024

The software industry is thriving, buoyed by digital transformation, soaring demand for cloud solutions, and the integration of advanced technologies like AI and ML, presenting lucrative opportunities for savvy investors. So, let’s look at tech stocks SS&C Technologies (SSNC), Informatica (INFA), Verint Systems (VRNT), and Yext (YEXT) poised for significant upside in 2024. Read on…

3 Pharma Stocks Primed for May Investment Opportunities

The pharma industry is poised for tremendous growth driven by surging healthcare needs, the introduction of groundbreaking medications, and relentless technological innovation. Hence, quality pharma stocks Collegium Pharmaceutical (COLL), Green Thumb Industries (GTBIF), and Bristol-Myers Squibb (BMY) emerge as prime investment options this month. Read more…

3 Bargain Internet Stock Buys for Savvy Investors

The increased internet penetration is reshaping various industries, driving digital transformation, connectivity, and access to services like e-commerce, remote work, and online entertainment. Thus, robust internet stocks Jamf Holding (JAMF), Upwork (UPWK), and TrueCar (TRUE), which are trading at discounts to their peers, could be ideal buys. Keep reading…

2 Paths for Stocks from Here

The recent rally for the S&P 500 (SPY) is nice to see. However, it is quite possible this is the end of the line for recent stock gains with more downside ahead. To explain the 2 distinct possibilities for stocks at this time is 44 year investment veteran Steve Reitmeister who shares this updated marketing outlook with trading plan and top picks in the article below...

Read More Stories

More Bank of America Corp. (BAC) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All BAC News