BAC's Bullish Q3 Clashes with DeepValue's Cautious Fair-Value Call

What happened

A Seeking Alpha article published December 26, 2025, reiterates a Buy on Bank of America, citing a strong 2025 run with nearly double the S&P 500's performance and momentum into 2026. BAC's Q3 2025 results showed 31% year-over-year EPS growth, robust credit quality, and strong operating leverage, though credit card charge-offs edged up to 3.72% in November. In contrast, the DeepValue master report maintains a 'WAIT' stance, acknowledging BAC's high-quality, diversified franchise but noting it trades at fair value (~13.6x P/E) with structural headwinds like Basel III capital rules and competition. The article highlights diversification from investment banking fees (+43%) and trading (+12%), but the report cautions that credit normalization in cards and commercial real estate remains a key watch item. Thus, while recent performance supports optimism, the fundamental assessment of balanced risk/reward per the master report persists.

Implication

The bullish article may fuel short-term enthusiasm, but it overlooks the master report's emphasis on BAC's elevated valuation limiting upside without sustained ROE improvement. Credit trends, particularly in cards and CRE, require vigilant monitoring as charge-offs have risen, echoing the report's warning of potential deterioration. Regulatory outcomes, such as Basel III endgame finalization, could tighten capital and constrain buybacks, directly impacting shareholder returns. Fee-based diversification from wealth and trading offers some earnings stability, but structural pressures from funding costs and competition cap long-term growth. Ultimately, investors are better served waiting for clearer signs of credit resilience or a price pullback before committing, aligning with the report's cautious stance.

Thesis delta

The new article reinforces BAC's operational momentum but does not alter the core thesis; the master report already recognized strong earnings but flagged fair valuation and headwinds. No shift is warranted—the 'WAIT' recommendation stands, pending resolution of credit quality and regulatory uncertainties that could sway the risk/reward balance.