What happened

Shares of Bank of America (NYSE:BAC) gained 42.9% in 2019, according to data provided by S&P Global Market Intelligence, easily outpacing the S&P 500 index's 28.9% gain. The stock tracked the broader market for most of the year before breaking out in the fourth quarter on strong earnings, growing optimism about the outlook for the financial sector, and the endorsement of one prominent investor.

^SPX Chart

^SPX data by YCharts

So what

2019 played out very differently than expected for Bank of America and other bank stocks, with analysts going into the year expecting a series of Federal Reserve interest rate hikes to power net interest margins and profits higher for the banking sector. The Fed made a U-turn midyear, temporarily spooking bank investors, but Bank of America and other financial institutions still managed to be outperformers.

Bank of America demonstrated the resilience of its portfolio in October when it announced earnings that easily beat analyst expectations. Its wealth and investment management net income was up 8% year over year, and consumer banking net income up 5% year over year. The company also continues to drive down costs, bringing its efficiency ratio -- a measure of noninterest expense as a percentage of revenue -- to below 60% from 69.6% in 2015.

A banker talks with clients.

Image source: Getty Images.

The bank also got a boost from Warren Buffett, as Berkshire Hathaway filed an application with the Federal Reserve in October to boost its stake in BofA above the 10% level.

Now what

Bank of America still has some potential catalysts going into 2020, including a potential late-cycle pickup in mergers and acquisitions that could help boost investment banking revenue. The industry also continues to have regulatory support, as evidenced by the Fed's willingness to step in aggressively in October to address liquidity concerns in the obscure, but important, repo market.

After its run, Bank of America trades at 13 times earnings, a premium to rivals including Citigroup and Morgan Stanley. It is hard to imagine BofA shares having a run in 2020 similar to the outstanding returns investors enjoyed in 2019.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.