Please ensure Javascript is enabled for purposes of website accessibility

1 Big Reason Bank of America Is Set to Soar Today

By Amanda Alix - Apr 15, 2013 at 12:27PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are feeling better about earnings today.

Bank of America (BAC 0.95%) is feeling pretty spiffy today as investors send its stock price incrementally higher since the market opened a very short time ago. With the big bank announcing earnings in two days, this could very easily have gone the other way -- but it didn't. For that, I believe, B of A has Citigroup (C -0.87%) to thank.

A harbinger of good news?
When peers JPMorgan Chase (JPM 1.41%) and Wells Fargo (WFC 0.64%) reported earnings last Friday, I thought things would look dismal for Bank of America this week. The reason? Despite decent reports, the two big banks showed that a slowdown in the mortgage refinance and origination markets has arrived, and likely isn't going away.

The reduction in business was apparent for Wells, and though JPMorgan managed to increase its mortgage volume from the last quarter of last year, CEO Jamie Dimon noted that the mortgage business was slowing. After all, I figured, if Wells Fargo is seeing a drop in production -- the bank that has seen the greatest mortgage production of all of the big banks for over a year now -- what does this say for B of A? Didn't CEO Brian Moynihan stress that his bank was stepping up this very thing in an effort to boost revenue and profits?

Enter Citigroup and its stellar report earlier today. Citi is often compared more closely with B of A, since both have been mortgage-lending laggards compared to Wells and JPMorgan, and both have been shedding costly add-ons that have been dragging down each bank's recovery. In Citi's case, too, a recent management shake-up may very well have dampened expectations for good news.

But Citi delivered the goods, beating on earnings and revenue -- and not by writing a slew of mortgages. Citi increased its income with higher revenue from Securities and Banking, which rose 24% year over year, and investment banking, up 22%. For this, Citi is feeling intense investor love today, and it has certainly earned it.

Is Citi's glow warming B of A, as well? I believe it is. Investors see that the same scenario could very well play out for Bank of America, and that is indeed quite possible. We will see soon enough, as the big guy reports earnings bright and early on Wednesday. Until then, I think the bank will be feeling some investor affection today, too.

As a group, the big banks are so far having a pretty good day. Things could change, though, so it is important to keep in mind that it is the overall performance of a stock that really counts. As Foolish, long-term investors, we recognize the fact that one-day changes in share price don't make or break an investment. Even stocks have good days and bad days, so it's important to realize that sometimes they're not portents of dire news, but merely squiggles that we can safely ignore. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Citigroup Inc. Stock Quote
Citigroup Inc.
$53.62 (-0.87%) $0.47
Bank of America Corporation Stock Quote
Bank of America Corporation
$37.02 (0.95%) $0.35
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$131.27 (1.41%) $1.83
Wells Fargo & Company Stock Quote
Wells Fargo & Company
$45.89 (0.64%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.