Bank of America Valuation!

Dear Reader,


Here I am going to attempt to value Bank of America Corporation, the US based global commercial and investment bank.

Currently, Bank of America Corporation is valued by private markets at 309.79 bln. USD. Is Bank of America fairly valued? No. I believe Bank of America is overvalued by circa 20%. Otherwise said, Bank of America Corporation should be worth around 240 billion USD to reflect its true intrinsic value.

Bank of America currently trades at 1.28 Price/Book and 12.69 Price/Earnings ratios. I think the market currently overprices the quality of Bank of America's assets. Soon, a global economic recession will come and Bank of America's loan portfolio and investment assets will suffer. The good times that have been around for more than 10 years now will come to an end somewhere in 2021-2022. This time the crisis will be a loan crisis, not trading assets/investment bank crisis. Commercial banks like JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will suffer a lot. US based commercial banks have been building up their loan books a lot and when the economy enters a recession they will have to write off large losses on their loan portfolios. I forecast the next financial crisis to be a long, shallow, but a protracted and ultimately deep one, like the recovery was. So US based commercial banks will be writing off losses for many years.

Bank of America has a diversified franchise, but it makes most of its money from making loans to both companies and individuals. So Bank of America is overvalued by 20% currently, in my humble opinion.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

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Respectfully yours,

Petar Posledovich