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Bank of America’s Stock is Falling Despite Earnings That Beat Expectations: Why?

Despite the fact that Bank of America’s earnings beat the forecasts, its stock is sharply lower today. Why?

A closer look at the numbers will reveal the reasons. EPS came in at 51 cents per share, which beat the market forecasts of 49 cents per share. However, the revenues came in weaker than expected. Revenues were forecast to come in at $20.8 billion, but the bank only pulled in $20.3 billion. Net income was also down 16% from the figures registered in the same quarter in 2019.

Market watchers are unanimous in their judgements on why Bank of America is down today despite beating the earnings estimates: the impact of near-zero interest rates is starting to hit hard. A breakdown of the earnings from each division of the bank shows that things are not as they were in the pre-pandemic period.

Income derived from interest rates plummeted 17% from the same quarter in 2019. Sales and trading have traditionally been a sweet spot for banks when markets are volatile. Bank of America was only able to make $2.2 billion in the 3rd quarter, compared with the $4.2billion made between April and June 2020.

To its credit, the bank was able to cut down on the leakages. Credit losses were curtailed from $5.1billion in Q2 2020 to $1.4billion in Q3 2020. But the full extent of these losses may only become visible when the stimulus wears out. Bank of America is trading 4.15% lower presently.

Technical Outlook for Bank of America

Today’s downside move has found support at the 23.81 price level after breaking down the price channel. If the 23.81 support gives way, 22.99 comes into focus. Further support can be found at 22.43.

On the flip side, a bounce off the current support targets 25.02, with 25.94 and 26.78 lining up as further potential targets to the north.

Bank of America Daily Chart