## Bank of America's YTD Momentum: What's Driving This Banking Giant's 23% Rally?

Bank of America stock has been one of 2025's strongest performers so far, climbing 23.1% year-to-date (YTD) and continuing its impressive 30.5% surge from 2024. While this rally has significantly outpaced the broader S&P 500, investors are left wondering if there's still room for gains—or if they've missed the best of this move. To answer that question, we need to dig into what's actually fueling BAC's momentum and where the bank is heading next.

## The Valuation Story: Why Bank of America Still Looks Reasonable

Despite the strong YTD performance, Bank of America is trading at a 12-month trailing price-to-tangible book ratio of just 1.98X, sitting below the industry average of 3.07X. This suggests the market isn't fully pricing in the bank's growth story yet. Compare that to JPMorgan's 3.17X valuation, and BAC looks like a relative bargain—though it does trade at a premium to Citigroup's 1.17X multiple.

The earnings picture reinforces this view. Zacks Consensus Estimates have been revised upward for both 2025 and 2026, now projecting EPS of $3.80 and $4.35 respectively. That translates to earnings growth of 15.9% and 14.5% in those years, right in line with management's medium-term target of almost 12% annual growth. For a bank trading below its peer average valuation while delivering double-digit earnings expansion, the setup looks compelling.

## Four Powerful Engines Behind The Upside

**Net Interest Income Gets a Reprieve**

The conventional wisdom is that lower interest rates hurt banks. But BAC's story is more nuanced. While the Federal Reserve's cuts—bringing rates to 3.75%-4.00% with expectations for another 25 basis points of easing ahead—will pressure net interest income initially, management sees a silver lining. As existing loans reprice higher while new deposits come in at lower rates, the bank actually benefits from the lag effect. Fixed-rate asset repricing, combined with rising loan and deposit balances, should offset the headwind.

Management is targeting 5-7% year-over-year NII growth for 2026. Loans and deposits are expected to grow at 5% and 4% compound annual rates respectively. For context, JPMorgan is guiding for 2025 NII of $95.8 billion (up 3% year-over-year), while Citigroup expects 5.5% NII growth (excluding Markets). As lending demand picks up in a lower-rate environment and regulatory capital requirements ease, BAC is positioned to grow its core lending business.

**Network Expansion Meets Digital Innovation**

Bank of America operates 3,650 financial centers across the country—and it's not sitting still. The bank has opened 300 new branches and renovated over 100 since 2019. More importantly, management's expansion strategy is working: since 2014, BAC has entered 18 new markets and plans to add six more through 2028. These expansion efforts have already generated 170 new financial centers and $18 billion in incremental deposits.

What makes this strategy significant is the blend of physical presence with digital capabilities. Even in a supposedly cashless world, customers still value local, trusted advisors. This hybrid approach gives BAC a competitive moat in attracting core deposits and deepening customer relationships—crucial advantages in a rate-cut environment. The bank invests over $4 billion annually in technology, including AI and automation, to enhance this experience.

**Investment Banking is Rebounding**

BAC's IB business took a beating when deal-making dried up in 2022-2023. But 2024 marked an inflection point, and the first nine months of 2025 showed solid momentum. While the rollout of new tariff policies initially cooled sentiment, deal activity has regained traction as clarity emerges around economic policy. Many delayed transactions are now moving forward.

Management is targeting mid-single-digit CAGR in IB fees with a 50-100 basis point market share gain over the medium term. By Q3 2025, BAC had already captured a 136-bp market share gain. The engine driving this growth: AI-powered insights, expanded middle-market coverage, and holistic capital solutions including private credit and alternatives—all leveraging the bank's presence across 87 jurisdictions.

**Fortress Balance Sheet & Capital Returns**

Bank of America cleared this year's Federal Reserve stress tests and raised its dividend 8% to 28 cents per share. The bank has increased dividends five times in the past five years at an 8.83% annualized growth rate. Additionally, BAC announced a new $40 billion share repurchase authorization, with the company planning to buy back $4.5 billion in shares quarterly.

The underlying strength is real: average global liquidity sources totaled $961 billion as of September 30, 2025. The bank maintains investment-grade credit ratings from all three major agencies—A1 from Moody's, A- from S&P, and AA- from Fitch—all with stable outlooks.

## The Catch: Credit Quality Concerns

Not everything is rosy. Bank of America's asset quality metrics have been deteriorating. Loan-loss provisions surged 115.4% in 2022, 72.8% in 2023, and 32.5% in 2024. Net charge-offs grew 74.9% in 2023 and 58.8% in 2024. The uptrend has continued into the first nine months of 2025.

The culprit: sustained high interest rates have pressured borrowers' creditworthiness, and tariff-driven inflation is adding another layer of stress. While BAC management remains vigilant about credit deterioration, this remains a potential headwind if economic conditions worsen.

## The Verdict: Why YTD Gains Don't Mean It's Too Late

Bank of America's 23.1% YTD surge might look impressive, but the fundamental setup suggests the bank still has room to run. Yes, earnings are already being revised higher, but the market is still pricing BAC at a discount to its historical premium. With management targeting 5-7% NII growth in 2026, a recovering IB business, expanding deposit franchises, and robust capital returns to shareholders, the investment case remains intact.

The real catalyst isn't the YTD performance—it's the medium-term earnings power. At current valuations, BAC offers a compelling risk-reward for investors seeking exposure to a systemically important bank with multiple growth levers and a shareholder-friendly capital allocation policy. Zacks currently rates Bank of America as a #2 (Buy).