Bank of America has been treading water for the past six months, holding steady at $55.16. The stock also fell short of the S&P 500’s 6.4% gain during that period.

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Why Is Bank of America Not Exciting?

We’re sitting this one out for now. Here are three reasons why there are better opportunities than BAC, plus one stock we’d rather own.

1. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

Bank of America’s net interest income has grown at a 8.2% annualized rate over the last five years, worse than the broader banking industry. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.

2. Low Net Interest Margin Reveals Weak Loan Book Profitability

The net interest margin (NIM) is a key profitability indicator that measures the difference between what a bank earns on its loans and what it pays on its deposits. This metric measures how efficiently it can generate income from its core lending activities.

Over the past two years, we can see that Bank of America’s net interest margin averaged a poor 2%. This metric is well below other banks, signaling its loans aren’t very profitable.

3. Projected TBVPS Growth Is Slim

Tangible book value per share (TBVPS) growth comes from a bank’s ability to profitably lend while maintaining prudent risk management and efficient operations.

Over the next 12 months, Consensus estimates call for Bank of America’s TBVPS to grow by 6.6% to $30.91, lousy growth rate.

Final Judgment

Bank of America’s business quality ultimately falls short of our standards. With its shares lagging the market recently, the stock trades at 1.4× forward P/B (or $55.16 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We’re pretty confident there are superior stocks to buy right now. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

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