Bank of America Corp is due to add a billion in earnings if it is able to execute its vision for card business by targeting growth market segments
Bank of America Corp (NYSE:BAC) is expected to add $1 billion in run rate to its earnings as well as boost its return on assets by 13 bit points if it is able to leverage its growing card business by targeting the right market segments. Analysts at Bernstein are highly optimistic on the scenario and have an Outperform rating on the stock and a full year price target of $17.
John McDonald, analyst at Bernstein, met with the top executives from Bank of America’s retail segment and returned with positive sentiments regarding the potential for profitability if the company can overcome certain challenges. According to the analyst, Bank of America’s card business is currently in growth mode and has the potential to substantially bolster the company’s profits if the execution strategy is handled with discipline. According to McDonald, the takeaway from a successful execution of 7% Compound Annual Growth Rate balance, should help the card segment rake in a cool billion in earnings.
The Bank of America has a solid position in the card industry and is one of the major players. The company has also proven that it can drive profitability from the segment and is ranked only second in general card outstanding metric with $90 billion at the end of the fourth quarter of 2015. Bank of America also ranks third in general purpose card purchase volume in the U.S with a total of $221 billion in fiscal year 2015. The company has 26 million accounts with active cards.
Bank of America believes that its card segment has strong growth potential and seems to be in the process of streamlining it card products, reducing them to 60%, to fully exploit a number of the most promising market segments. Bank of America’s card products will now be targeted in terms of clients at mass market, mass affluent, affluent and high net worth market segments with value added services such as reward cards for travel.