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Bank Of America Corporation (BAC): This Financial Services Stock Is A Good Addition to Your Portfolio Now

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Bank Of America Corporation (BAC): This Financial Services Stock Is A Good Addition to Your Portfolio Now

We recently compiled a list of the 9 Best Financial Services Stocks To Buy Now. In this article, we are going to take a look at where Bank Of America Corporation (NYSE:BAC) stands against the other financial services stocks.

Although there was significant turbulence in the financial markets in August, the state of global financing is still stable. Despite considerable falls in the equities and corporate debt markets, financing conditions have not tightened significantly, suggesting borrowing resilience.

However, following an almost 10% drop, the broad US stock market is still 5% below its peak in July. Similar declines have been seen in European stocks, although there has been some recovery in these markets; the 500 large companies market is up 3% from its August low.

The markets for corporate bonds have also been impacted. Higher-rated corporate bonds saw an increase in risk premiums, but not to the point where it materially affected borrowing conditions. The current market volatility, according to Chris Jeffrey of Legal & General Investment Management, hasn’t affected corporate or household finance conditions significantly. This perspective is supported by the financial conditions index of a major global financial institution, which indicates that while circumstances have tightened since mid-July, they are still historically loose and more accommodating than they were for a large portion of the prior year.

Amidst the financial turbulence, the financial services industry has faced challenges, but it also showed resilience. The long-term outlook for the industry remains positive. As we have mentioned in our article, “25 Biggest Financial Firms in the World,” the financial services industry is expected to rise at a CAGR of 7.7% over the next few years, from $31138.82 billion in 2023 to $33539.52 billion in 2024. In 2023, Western Europe accounted for the largest portion of the financial services market, with North America coming in second. Financial services are transforming as a result of generative AI, which presents chances for creativity and efficiency.

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The McKinsey Global Institute (MGI) claims that banks are racing to implement Gen AI and that its full potential can be realized with the correct operational model in place. According to MGI, the use of Gen AI in the global banking market has the potential to generate value of $200 billion to $340 billion per year, or 2.8 to 4.7 percent of industry revenues, primarily through increased productivity. A new study by MGI examined the usage of Gen AI by 16 of the largest financial institutions in the US and Europe, which together manage assets worth close to $26 trillion. According to the study, more than half of the organizations examined have embraced a more centrally driven structure for next-generation AI, even if their current data and analytics architecture is relatively decentralized. Moreover, artificial intelligence, according to EY, is changing financial markets by improving risk management and enhancing customer experience due to its wide range of uses.

The RSM US’s Financial Services Industry Outlook 2024, also notes that the financial services market is quickly evolving, with a focus on responsible AI in insurance. Similar actions are being taken by states as well. For instance, insurance companies are required by the California Consumer Privacy Act to explain how AI is used in pricing and coverage decisions; violation carries hefty fines. Secondly, the number of retail-friendly investment products is also increasing. Retail investors are the focus of growing interest from asset managers, exchanges, and broker-dealers. Finally, the real exposure of financial institutions to CRE maturities is another trend in the financial services industry. Hence, financial institutions analyzing CRE-related risk should conduct a thorough credit risk evaluation.

Methodology:

We sifted through holdings of financial services ETFs and financial media to form an initial list of 20 financial services stocks. Then we selected the 9 stocks that had the highest upside potential. The stocks are ranked in ascending order of the upside potential.

Some big shots in the financial services industry have been left out owing to our methodology since they had negative consensus upside.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)

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A professional banker providing consultation to a customer in the security of his office.

Bank Of America Corporation (NYSE:BAC)

Analysts’ Upside Potential: 9.22%                

In terms of total assets, Bank of America is the second-biggest commercial bank in the US. Boasting a significant retail banking presence throughout all major U.S. regions, Bank of America Corp (NYSE:BAC) provides services to about 69 million individual and small business customers.

BAC has created a strong brand presence and ease of use for its customers with about 3,800 retail financial locations, 15,000 ATMs, and top digital banking systems. The digital platforms of the bank boast an approximate user base of 46 million, comprising 38 million active mobile users. This suggests that the bank has effectively shifted to digital banking and is capable of meeting the changing demands of its clientele.

Global Wealth & Investment Management (GWIM), Global Banking, Global Markets, and Consumer Banking are BAC’s four primary business segments. By diversifying its business, BAC is able to provide a broad range of banking and nonbank financial services and products while reducing the risk of market and industry-specific downturns.

Bank of America has put in place initiatives that help both customers and staff. The most sophisticated and first publicly accessible virtual financial assistant, Erica, was introduced in 2024 and as of 2024, more than two billion clients had engaged with them. Erica’s skills assist corporate and individual clients throughout the company, including CashPro, Benefits, and Merrill.

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BAC raised its minimum hourly wage to $23 in September 2023, with intentions to raise it to $25 by 2025.

Strong performance in the investment banking segment and solid net interest income helped Bank of America Corporation (NYSE:BAC) submit an earnings report card for the second fiscal quarter that was better than anticipated. The price of the shares increased by over 5% as a result of the earnings report, reaching a high not seen since the start of FY 2022.

In general, Bank of America’s robust revenue from trading and investment banking, along with a favorable projection for net interest income, points to the company’s durability and growth potential even in an environment where the fed is trying to curtail inflation. However, increased deposit costs and growing provisions for credit losses are eating into profitability.

ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:

“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”

BAC is one of the Best Financial Services Stocks To Buy Now since it has promising growth potential, as seen by 19 analysts, BAC has a consensus Buy rating with an average price target of $42.39 and an upside potential of 9.22% from the current stock price of $38.81.

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Overall BAC ranks 7th on our list of the best financial services stocks to buy. While we acknowledge the potential of BAC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

 

Disclosure: None. This article is originally published at Insider Monkey.

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Oregon Legislature passes controversial campaign finance changes

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Oregon Legislature passes controversial campaign finance changes
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Legislators passed a bill March 5 to modify forthcoming changes to Oregon’s campaign finance system despite outcry from good government groups who say the bill creates new loopholes.

Those groups were key in creating House Bill 4024, which was created and passed in 2024 in place of warring ballot measures seeking to overhaul the system.

That legislation included new limits on contributions, including capping individual spending on statewide candidates each cycle at $3,300, and other changes. Parts of the bill were set to go into effect in 2027 and 2028.

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Under the new proposal, House Bill 4018, the limits would still begin in 2027, but disclosure requirements and penalties would be pushed to 2031. It also gives the Secretary of State money to update the campaign finance system, but far less than the office previously thought it might need.

Representatives voted 39-19 to pass the bill. A few hours later, the Senate passed it 20-9.

Fourteen of the “no” votes in the House were Democrats, including Reps. Tom Andersen, D-Salem, and Lesly Muñoz, D-Woodburn.

Muñoz told the Statesman Journal she voted against the bill after hearing from people upset with the bill’s process.

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Six Democratic senators cast a “no” vote on HB 4018.

Oregon campaign finance reform advocates say they were left out of negotiations

After working together in 2024, advocates said Speaker of the House Julie Fahey, D-Eugene, “ghosted” them.

Good government groups said the bill does far more than address necessary technical fixes to HB 4024.

HB 4018 is “a complete betrayal of the deal that was made two years ago,” Norman Turrill of Oregon’s League of Women Voters said.

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Should the bill be signed by Gov. Tina Kotek, the groups said they will push their own changes through a 2028 ballot initiative.

Those advocates have outlined at least 11 different changes they believe the bill creates. The bill’s contents were first shared through a Feb. 9 amendment that was posted after 5 p.m., hours before it received a public hearing in an 8 a.m. work session on Feb. 10 and later, Feb. 12.

Secretary of State Tobias Read told legislators in January his office was requesting $25 million as a placeholder to fund a new campaign finance system for the state. Read was not secretary of state when House Bill 2024 was passed and his office is now working to implement the bill’s changes on a fast approaching deadline.

An additional amendment to the bill instead gives the Secretary of State’s Office $1.5 million for staff, some of whom would be tasked with updating the state’s current system.

House members agreed March 4 to send the bill back to committee, presumably to be amended. A 5 p.m. committee meeting was canceled about an hour after initially being announced.

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A work session on HB 4018 was moved to the next morning. After an hour of delay, legislators convened and finished the meeting, moving the bill back to the floor without any changes, in less than three minutes.

A new campaign finance bill, Senate Bill 1502, was introduced and scheduled for a public hearing and work session March 4.

The bill is “very simple,” Senate Minority Leader Bruce Starr, R-Dundee, said. It tells the Secretary of State’s Office to draft a bill for the 2027 session with necessary campaign finance improvements from HB 4024 and HB 4018.

Three senators voted against the bill March 5. It now moves to the House. Legislators have a March 8 deadline to end the session.

“SB 1502 would not correct the severe damage to campaign finance reform that will occur, if HB 4018 B is enacted in this session,” Dan Meek of Honest Elections Oregon wrote in submitted testimony.

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Lawmakers appear unsatisfied, but supportive, toward Oregon campaign finance bill

House Majority Leader Ben Bowman, D-Tigard, said HB 4018 made positive changes but acknowledged it was “a challenging vote for many of us.”

“We are implementing this whole new system that is new for all of us, and there are a lot of opinions and there are a lot of details to figure out,” House Minority Leader Lucetta Elmer, R-McMinnville, said. Elmer and Bowman carried the bill in the House. “With that being said, we’re moving forward in good faith, knowing that we’ll also be coming back next year to make sure that those details and all those kinks are worked out.”

Rep. Mark Gamba, D-Milwaukie, said he was concerned about the bill and the “non-inclusive process” that led to it.

Gamba pointed to a letter from the Washington, D.C.-based Campaign Legal Center that states in part that the bill “would substantially revise critical campaign finance reforms enacted two years ago in Oregon” and weaken the state’s campaign finance law.

The current bill is not the only possibility for moving forward, Sen. Jeff Golden, D-Ashland, told lawmakers. Proposed amendments that would have extended implementation timelines without the additional changes were ignored, he said.

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“House Bill 4024 and this bill, 4018, have two things in common. One, they were thrown together in a few days behind closed doors, mostly by organizations who dominate campaign funding in the current system,” Golden said. “And two, very few legislators understand what is actually in these bills.”

He urged lawmakers to abandon the system created in House Bill 4024 as an “uncomfortably expensive learning experience” and develop a new plan based on successful programs in other states.

Sen. Sara Gelser Blouin, D-Corvallis, also spoke against the bill on the Senate floor.

“The concern that I had and that my constituents had was technical changes are one thing, but it should not be increasing the amount of money that candidates can take in or hold or carry over,” Gelser Blouin said. “Unfortunately, as it’s drafted, this bill does all of those things.”

HB 4024 is too complicated and “unimplementable” without the fixes in HB 4018, Starr said.

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Sen. Lew Frederick, D-Portland, agreed, saying HB 4018 and SB 1502 give reassurance about a system he has concerns about.

“If there were no cameras and the lights were off, I think most people would agree this is not the bill we want,” Rep. Paul Evans, D-Monmouth, said.

Some lawmakers expressed similar feelings of discontentment with the bill in Ways and Means and one of its subcommittees on March 3, but said they felt it was important to make some progress on the issue. Discussions could happen again in 2027, they said.

Rep. Nancy Nathanson, D-Eugene, who ultimately voted in favor of the bill, said March 3 supporting it “is a very painful choice to make.”

Statesman Journal reporter Dianne Lugo contributed to this report.

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Anastasia Mason covers state government for the Statesman Journal. Reach her at acmason@statesmanjournal.com or 971-208-5615.

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Paramount ally RedBird says using Middle East money to help buy Warner Bros. could be a good idea

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Paramount ally RedBird says using Middle East money to help buy Warner Bros. could be a good idea

  • Last year, Paramount said it would use $24 billion in funding from Saudi Arabia, Abu Dhabi, and Qatar to help buy WBD.
  • Now that Paramount has won that deal, it won’t say whether that’s still the plan.
  • A key Paramount backer suggests that Gulf money would be a good thing for this deal.

We still don’t know if Paramount intends to use billions of dollars from Gulf states like Saudi Arabia to help it buy Warner Bros. Discovery.

But if Paramount does end up doing that, it wouldn’t be a bad thing, says a key Paramount backer.

That update comes via Gerry Cardinale, who heads up RedBird Capital Partners, the private equity company that helped finance Larry and David Ellison’s acquisition of Paramount last year and is doing the same with their WBD deal now.

In a podcast with Puck’s Matt Belloni published Wednesday night, Cardinale wouldn’t comment directly on Paramount’s previously disclosed plans to use $24 billion from sovereign wealth funds controlled by Saudi Arabia, Abu Dhabi, and Qatar to help buy WBD.

Instead, he reiterated Paramount’s current messaging on the deal’s financing: The $47 billion in equity Paramount will use to buy WBD will be “backstopped” by the Ellison family and RedBird — meaning they are ultimately on the hook to pay up. The rest of the $81 billion deal will be financed with debt.

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Cardinale also acknowledged what Paramount has disclosed in its current disclosure documents: It intends to sell portions of that $47 billion commitment to other investors: “We haven’t syndicated anything at this time,” he said. “We do expect to syndicate with strategic, domestic, and foreign investors. But at the end of the day, that alchemy shouldn’t matter because it’ll be done in the right way.”

And when asked about concerns about Middle Eastern countries owning part of a media conglomerate that includes assets like CNN, Cardinale suggested that could be a plus.

“I think we want to be a global company,” he said. “You look at what’s going on right now geopolitically. What’s going on right now geopolitically out of the Middle East wouldn’t be, the positives of that would not be happening without some of those sovereigns that you’re referring to.”

He continued:

“The world is changing. We can stick our head in the sand and pretend it’s not, or we can embrace globalization and the derivative benefits both geopolitically and otherwise that come from that. Content generation coming out of Hollywood is one of America’s greatest exports.
I firmly embrace the global nature and orientation that we bring to this from a capital standpoint, from a footprint standpoint, etc. At the end of the day, I do understand some of the concerns that you’ve raised, but that will work itself out between signing and closing because at the end of the day, worst-case scenario, Ellison and RedBird are 100% of this thing.”

All of which suggests to me that Paramount still intends to use money from Gulf-based sovereign wealth funds to buy WBD.

What I don’t understand is why the company won’t say that out loud. Does that mean it’s still negotiating with potential investors? Or that it’s reticent to disclose outside investors, for whatever reason, until it has to? A Paramount rep declined to comment.

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Crypto bill hits new impasse, raising doubts over its future

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Crypto bill hits new impasse, raising doubts over its future
Talks on landmark crypto legislation have hit a new impasse after banks said they could not back a compromise pushed by the White House, a development that cast doubt on whether the bill will pass this year and sparked criticism from President Donald Trump ​who accused lenders of trying to undermine it.
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