Bank of America (NYSE:BAC) will report Q1 2007 financial results on Thursday, April 19. Here's what to expect.

Word on the street:

  • Analysts expect earnings to increase 8%, to $1.16 per share.
  • The Motley Fool CAPS community has awarded this stock a four-star rating.

By the numbers:
The key number for Bank of America is 10%. Federal law dictates that no single bank can hold more than that portion of the nation's deposits. With nearly $600 billion in domestic deposits at the end of 2006, Bank of America currently has about a 9% share of the domestic deposit market.

More importantly, this means that Bank of America can no longer make big acquisitions that would push it past the 10% cap. Instead, it must largely sit on the sidelines as Barclay's (NYSE:BCS) eyes ABN Amro (NYSE:ABN), although there has been some noise about Bank of America picking up ABN Amro's LaSalle Bank division and gaining greater deposit-market share in Chicago.

One Fool says:
Some vocal critics believe that Bank of America has been too acquisitive, diluting shareholder value in the name of empire-building. Over the past couple of years, Bank of America purchased FleetBoston for $47 billion, MBNA for $34.6 billion, and U.S. Trust for $3.6 billion.

Bank of America has done a reasonably good job so far with these integrations, but now it must grow organically, lacking the option of pursuing more big mergers. Its biggest rival, Citigroup (NYSE:C), has recently struggled with this same challenge. Most importantly, shareholders want to see earnings, organic growth and return on equity improvement. Thanks to mergers, Bank of America has a lot of different weapons in its arsenal, including its credit card, retail banking, and wealth-management units. To create shareholder value, Bank of America must prove that it can cross-sell these services.

Fools should also keep an eye on B of A's organic deposit growth. Whereas competitors like Citigroup, ING (NYSE:ING), and HSBC (NYSE:HBC) all offer high-yielding online savings and money market accounts, Bank of America has gone another route. Instead of offering yield, it's trying to make deposits more "sticky" via bill payment, payroll, free investment trading, and "keep the change" offerings. Investors should check to see whether that initiative is succeeding.

Wait! There's more. Be sure to read pre-earnings news and analysis for other Big Banks.

Bank of America is a Motley Fool Income Investor recommendation. Find more dividend superstars with a free 30-day trial of James Early's low-risk, high-reward newsletter service.

Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.