BAC 3Q25 - Beating estimates everywhere. What's next? Bull case $68. Bear case $35

Cheat Sheets

October 15, 2025

Bank of America Investment Report - Q3 2025 ROTCE 15.4% | $1.06 EPS Beat | Record NII & IB Fees Surge 43%

BANK OF AMERICA CORPORATION (BAC)

🏦 ROTCE 15.4% Rising | Rev +11%, Expenses +5% = 560bps Operating Leverage | Efficiency <62%, ROA 98bps

Q3 2025: All Segments Grew Earnings | 27 Qtrs Checking Growth | IB Pipeline Up Double Digits | 2026 NII Guide: +5-7%

💰 Market Cap: $372B | 🏢 Employees: 213K | 🌍 Assets: $3.3T | Founded: 1784
👨‍💼 CEO Brian Moynihan | 🎯 #2 Largest US Bank | 💎 CET1: 11.6% ($30B+ Buffer)
$52.69
📈 +$2.60 (+5.2%) Today
+16% YTD (vs JPM +49%)
Where Could the Stock Go?

18-Month Outlook (Mid-2027) - Today's Price: $52.69

$68.00
Best Case (+29%)
If Everything Goes Right
🚀 What needs to happen:
Interest income keeps growing aggressively • Investment banking stays hot • They gain even more customers • Their profit margin hits 16-17% • Credit stays perfect (no loan defaults) • Market gives them a premium valuation
$56.00
Most Likely (+6%)
Business as Usual
⚖️ What needs to happen:
Steady growth continues like today • Interest income grows 5-7% per year • Investment banking normalizes • Customer growth steady • Profit margin reaches 14-15% • Normal loan losses • Fair market valuation
$35.00
Worst Case (-34%)
If Things Go Wrong
🔻 What could go wrong:
Recession hits the economy • Credit card and business loan defaults surge • Commercial real estate crashes • Big regulatory fines ($2-3B) • Customers pull out deposits • Investment banking dries up • Profit margins collapse
The TL;DR for Investors
🎉
They Crushed It
Earnings beat by 12%. Every single business made more money than last year. The real story? They're growing revenue way faster than expenses (11% vs 5%), which means more profit drops to the bottom line. Investment banking fees jumped 43% to over $2B. They gave shareholders back $7.4B through buybacks and dividends.
📱
The Deposit Machine Won't Stop
212,000 new checking accounts this quarter. That's the 27th quarter in a row of growth. They now have 70M clients and 59M people using their digital banking (more than any other US bank). Why it matters: These checking accounts are basically free money for the bank—they pay customers just 0.58% interest while lending it out for much more.
🎯
Profits Getting Better
Return on equity hit 15.4% (up from 13.4% last quarter). Translation: For every $100 of shareholder money, they're making $15.40 in annual profit. That's solid, though JPMorgan does 19%. The CFO says this number will "continue to walk north from here." They're buying back tons of stock and have way more capital than required.
⚠️
The Concerns
Regulatory issues are still hanging around. BofA is in "ongoing discussions" with regulators about anti-money laundering stuff—potential fines are unknown. The stock is up 16% this year, which sounds good until you see JPMorgan is up 49%. They're still the #2 bank playing catch-up to #1.

📊 Q3 2025: "Strong Operating Leverage" - Brian Moynihan | ROTCE 15.4%, Efficiency <62%, ROA 98bps, 14 Quarters S&T Growth

NI $8.5B +23% • EPS $1.06 +31% • Revenue $28.0B +11% • Record NII $15.4B (FTE) • IB $2.0B+ +43% • S&T 14th Straight Quarter Growth • Returned $7.4B • Investor Day Nov 5th 💪

💰
$28.24B
Q3 2025 Revenue
+11% YoY
⚡
$15.4B
Net Interest Income (FTE)
+9% YoY (Record)
🎯
$1.06
EPS Q3
+31% YoY
🚀
15.4%
ROTCE Q3
vs 13.4% Q2

📞 Key Takeaways from Call

🎊
Operating Leverage Champion
560bps operating leverage • Revenue +11% outpaced expenses +5% • Efficiency <62% • ROA 98bps • All segments grew earnings • Consumer +28% NI • Wealth +19% • Banking +12% • Markets +6%
🚨
IB Beast + 27 Qtrs Deposit Growth
#3 IB ranking • Advisory +51% • Debt +42% • Equity +34% • Pipeline up double digits • 212K net new checking accounts = 27 consecutive quarters of growth • 4th straight quarter noninterest bearing deposits up
💎
Credit Quality Stellar
NCO $1.4B down 10% QoQ • NCO ratio 47bps down 8bps • Card NCO 3.40% vs 3.82% Q2 • Risk-adjusted card margin 7.5% • Commercial NPLs down 19% QoQ • CRE criticized down 25% YoY • Provision $1.3B modest release
🔬
AI = 2M Daily Interactions
2 MILLION Erica interactions yesterday alone • 700 questions answered vs 200 initially • Coding costs down 10% from AI • Headcount 217K→213K in 3 years • "Applied technology not theoretical" - Brian

📍 Brian: "Bank of America delivered a strong third quarter with good growth both in the top line revenue and bottom line EPs. All driven by strong operating leverage. Our ROTC improved to 15.4%."

🎯 Operating Leverage: 560 basis points • Revenue +11% YoY significantly outpaced expense +5% • Efficiency fell below 62% • ROA reached 98 basis points

💰 Consumer Power: $3.4B NI up 28% • 600bps operating leverage • Efficiency below 50% • ROA 31% • "We gained more customers this quarter. These accounts have strong balances per account... That is a winning combination" - Brian

🏦 Deposits: $2.0T+ total • Up $72B YoY • 212K net new checking accounts = 27 consecutive quarters • 4th consecutive quarter noninterest bearing up • Rate paid 58bps on $950B consumer deposits

⚠️ Q4 Guide: NII $15.6B+ (FTE) higher end of range = 8% growth vs Q4'24 • Expenses roughly flat with Q3 • Headcount flat • IB pipeline up double digits

💬 Analyst Q&A - Key Points

🎯 2026 NII Outlook: Alastair: "5 to 7% growth over 2025. Core growth 4-5% plus fixed rate asset repricing boost. $10-15B mortgage/MBS rolling off quarterly at 150-200bps higher yield."

💸 ROTCE Path: Alastair: "You should expect us to continue to walk our return on tangible common equity north from here. We plan to take you through that at Investor Day."

📊 AI Impact: Brian: "2 million customer interfaces yesterday with Erica alone. This isn't something to come, it's past tense. We're saving 10% on coding costs. But we're reinvesting that to grow faster."

💳 Deposit Beta: Alastair: "Wealth will pass through rate cuts fully like money market rates. Global banking will pass through on client-by-client basis. Same disciplined pricing on way down as on way up."

📉 Credit Outlook: Alastair: "Credit portfolios are performing very well. Consumer charge offs down. Commercial down. We would not expect much change in total NCOs near term given steady trends."

🏢 Markets Lending: Alastair: "Clients are top asset managers and institutions globally. Collateral pools are high quality and diversified. Structures have security and triggers. Losses <1bp in CCAR, <0.1% in CLS."

⚡ Q4 Outlook: IB pipeline up double digits. S&T remains constructive but normal Q4 seasonality. Expenses flat with Q3 as headcount flat. NII $15.6B+ (FTE).

💰 Capital Target: Brian: "Target 50bps over regulatory minimums. Continue to work it down. Hope to grow our way through it with organic growth. If not, we'll peel down capital."

🚀 Why Bulls Love This Stock
📱
Digital Banking King
They have more digital users (59M) than any US bank. That's huge because digital customers cost way less to serve than branch customers. Plus, they keep adding 200K+ checking accounts every quarter. Once people open a checking account, they rarely leave—it's sticky revenue.
⚡
Interest Income Growing for Years
They're guiding for 5-7% interest income growth in 2026. Why? Every quarter, billions in old low-rate mortgages roll off and get replaced with new ones at 1.5-2% higher rates. That's pure profit improvement that'll keep happening for years.
👑
Winning Investment Banking
They've gained more market share in M&A than any other bank since 2022. Investment banking fees hit $2B+ this quarter (highest ever outside pandemic), and their pipeline is up double digits. Advisory fees alone jumped 51%.
🚀
Buyback Machine
They returned $7.4B to shareholders this quarter alone ($30B+ annual run-rate). They have way more capital than required by regulators. With profits rising and share count shrinking, earnings per share should accelerate.
🐻 Bear Case
🚨
AML = Sword of Damocles
"Ongoing discussions" with regulators = unknown timeline • AML/sanctions violations = multi-billion dollar fines possible • Market waiting for other shoe to drop • Could dwarf capital returns • Reputational damage • Regulatory scrutiny intensifying
📉
CRE = Ticking Time Bomb
Office CRE = structural decline • Remote work permanent • Criticized assets elevated • Recession = wave of defaults • "One cockroach" problem = more hiding • Reserves adequate now but may not be if crisis hits • Geographic concentration risks
💸
Reinvesting AI Savings
62% efficiency vs JPM 55-57% = persistent gap • Brian: "We're reinvesting AI savings to grow faster" = not dropping to bottom line • 10% coding savings reinvested not banked • Headcount only down 500 YoY despite revenue +$3B • Bulls expecting more expense leverage may be disappointed
⚠️
ROTCE Gap vs JPM Closing Slowly
ROTCE 15.4% vs JPM 19% = 360bps gap still • Stock +16% YTD vs JPM +49% YoY = lag persists • "Walk ROTCE north from here" = gradual not sudden • Investor Day Nov 5th may disappoint if no aggressive targets • Market wants 17%+ ROTCE commitment like peers

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.