Will BofA Discount to Book Value Enhance Earnings?

First-quarter EPS missed the consensus estimate by two cents for a downside surprise of nearly 7%. The stock price rose 10.6% during the second quarter. The bank is expected to continue its cost-cutting ways, and operational efficiency may be a more potent driver of revenues and profits than anything else. The forward P/E ratio is 10.76 and the price-to-book ratio is 0.79.

This bank reported solid first-quarter earnings that were driven by lower expenses and absence of substantial legal costs, which had strangled the bank for years. The first-quarter 2015 results saw year-over-year improvement and earnings of $0.27 per share were substantially up from a loss of $0.05 in the prior-year quarter. Some analysts even think that earnings of $2 per share this fiscal year are not out of the question for the money center giant. Total 2015 earnings estimates are expected up 284% from last year.

For the first quarter, Bank of America had a stated book value that rose 4% from a year earlier to $21.66 per share, and it compared to a tangible book value per share that was up 7% from a year earlier to $14.79 per share.

The company is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.

During the first quarter alone, the three largest banks collectively generated $1.14 billion from overdraft fees and related service charges. JPMorgan, Bank of America and Wells Fargo were each reported as having more than $350 million in overdraft fees. The same three banks with the highest ATM fees collected in the first quarter were Wells Fargo at $90 million, Bank of America at $87 million and JPMorgan at $56 million.

Shares of Bank of America were up 0.6% at $17.12 late on Tuesday. The stock has a consensus analyst price target of $18.34 and a 52-week trading range of $14.84 to $18.21.