Bank of America Soars 23.1% YTD, But Does the Valuation Still Make Sense?

Bank of America (BAC), the nation’s second-largest bank, has delivered impressive year-to-date performance, surging 23.1% through 2025 and building on its robust 30.5% gain from 2024. This positions it ahead of the broader S&P 500 Index, though it trails competitors JPMorgan (JPM) and Citigroup (C), which have posted respective gains of 31.9% and 53.2% YTD.

The central question for prospective buyers: Has the strong rally already priced in the bank’s growth prospects, or are there still compelling reasons to add exposure? A deeper examination of BAC’s valuation metrics, earnings trajectory and strategic initiatives suggests the story isn’t finished.

Valuation: Trading Below Industry Averages

Despite its YTD climb, Bank of America trades at a 12-month trailing price-to-tangible book (P/TB) ratio of 1.98X—below the industry median of 3.07X. This discount positioning offers an interesting entry opportunity compared to JPMorgan’s elevated 3.17X valuation, though BAC commands a premium to Citigroup’s discounted 1.17X.

Consensus earnings estimates for 2025 and 2026 have been revised upward to $3.80 and $4.35 per share, respectively, implying growth rates of 15.9% and 14.5%. This forward-looking strength, paired with current valuation levels, suggests the market may not be fully pricing in BAC’s earnings power.

The Path to Double-Digit Earnings Growth

Bank of America’s management targets approximately 12% earnings growth over the medium term, supported by several distinct levers:

Interest Rate Dynamics & NII Expansion

While Federal Reserve rate cuts—including a recent move to 3.75%-4.00% with another 25 basis point cut expected—typically pressure net interest income (NII), BAC’s diverse funding model cushions the blow. Fixed-rate asset repricing, higher loan and deposit balances, and declining funding costs should help mitigate headwinds. Management projects 5-7% year-over-year NII growth for 2026.

As rates stabilize at lower levels, lending demand should accelerate. Relaxed regulatory capital requirements will permit banks to deploy excess capital into loan origination, particularly in resilient commercial and consumer segments. Over the medium term, loans and deposits are forecast to grow at compound annual rates of 5% and 4%, respectively.

Investment Banking Momentum

After a multi-year slump, deal-making is rebounding. Though early 2025 faced headwinds from trade policy announcements, the backdrop has improved as economic clarity returned and capital remained available. Bank of America’s IB business delivered decent results in the first nine months of 2025.

The bank targets mid-single-digit CAGR in IB fees with 50-100 basis points of market share gains, leveraging AI-driven insights, talent expansion and enhanced middle-market coverage. Its global reach across 87 jurisdictions and solutions spanning private credit and alternatives position it well.

Network Expansion & Digital Integration

BAC operates 3,650 financial centers nationwide and has opened 300 new locations since 2019. Expansion into 18 new markets since 2014, with six additional markets planned through 2028, has already generated 170 new financial centers and $18 billion in incremental deposits. This physical-digital blend strengthens core deposit relationships and creates cross-sell opportunities.

Capital Return & Shareholder Rewards

The bank cleared the Federal Reserve’s stress test, raising its dividend 8% to 28 cents per share—the fifth increase in five years with an 8.83% annualized growth rate. Additionally, BAC announced a new $40 billion share repurchase authorization, with quarterly buybacks of $4.5 billion planned.

Asset Quality Pressures Warrant Attention

One area of concern: credit deterioration. Provisions surged 115.4% in 2022, 72.8% in 2023 and 32.5% in 2024, continuing their uptrend into early 2025. Similarly, net charge-offs grew 74.9% in 2023 and 58.8% in 2024. As elevated interest rates persist and tariff-driven inflation takes hold, borrower credit profiles may face additional strain.

Management remains vigilant, but sustained credit pressure could cap upside.

The Verdict: Buyers Still Have a Window

Even after its robust YTD advance, Bank of America stock merits consideration for those seeking exposure to a well-capitalized, diversified banking platform. The setup for 2026—including NII resilience, pickup in lending, recovering investment banking and fortress-like liquidity—supports the earnings power needed to justify current valuations.

With a sub-industry P/TB multiple, solid dividend growth and an active buyback, the risk-reward tilts constructive. The Zacks Rank currently stands at #2 (Buy), reflecting analyst confidence in the near-to-medium term outlook.

For investors comfortable with banking sector cyclicality, the combination of valuation discipline and strategic execution makes this an opportune moment to establish or add to positions.