We recently published a list of 10 Best Bank Stocks to Buy in 2025. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against other best bank stocks to buy in 2025.
2024 was a stellar year for banking giants in the United States. According to a report in the Financial Times, the seven largest banks in the country by deposits accounted for 56% of the industry’s profits during the first nine months of the year, up from 48% during the same period in 2023.
Among these, the four biggest banks collectively reported around $88 billion in profits between January and September 2024, representing 44% of the American banking industry’s profits. This puts them on course to grab their largest industry share since 2015.
The Federal Deposit Insurance Corporation (FDIC) has stated that equity capital increased by 3.5% in Q3 2024 to $81.6 billion, reflecting the growing capitalization in American banks. In November, the Federal Reserve Board found that 99% of the country’s banks reported capital above the regulatory requirements. This significant improvement from 2020 highlights the banking industry’s collective ability to sustain unforeseen losses.
Credit rating agency, Moody’s, has also upgraded the global banking industry from negative to stable for the first time since 2023, citing monetary adjustments and interest rate cuts among G-20 countries as reasons behind the upgrade. On December 18, the Federal Reserve announced the third cut for the year, reducing the central bank’s target interest rate by a quarter-point to between 4.25% and 4.5%.
Trump’s victory in the US presidential elections has raised hopes of lax regulations in the financial sector amid growing concerns about antitrust scrutiny and capital requirements slowing down investment banking and lending revenues. While the President-elect has yet to name his picks to head the country’s banking agencies, potential nominees are already hinting at pulling back regulations.
Financial analysts believe reduced oversight and a business-friendly environment are likely to drive revenues and loan growth and improve banks’ bottom line. At the same time, they also warn of the risks ongoing geopolitical conflicts can have on the general outlook of the global economy.
Increasing trade tensions, with growing protectionist policies can also hurt investment flows in 2025. Following his election victory, Trump has vowed to impose steep tariffs on imports from Canada, China, and Mexico, which could increase costs for manufacturers. The 78-year-old last month also threatened the EU with tariffs if it does not buy more oil and gas from the United States.
Methodology
For this article, we sampled stocks from an ETF issued by Invesco with exposure to banking companies. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024. The 10 best bank stocks to buy in 2025 have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
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).
Is Bank of America Corporation (BAC) the Best Bank Stock to Buy in 2025?
A professional banker providing consultation to a customer in the security of his office.
Bank of America Corporation (NYSE:BAC) is a bank and financial holding company that serves individuals, companies, and institutions through its eight lines of business. The bank has an extensive network of branches and also enjoys a robust digital presence, which has allowed it to attract customers, expand its deposit base, and effectively manage costs to maintain profitability.
The company enjoys a healthy balance when it comes to the contribution of its segments towards the overall performance. A little over half of its earnings come from the Consumer Banking and Global Wealth & Investment Management (GWIM) businesses, which are focused on serving the people. The other half comes from Global Banking and Markets businesses, which are dedicated toward companies and institutional investors.
Bank of America Corporation (NYSE:BAC)’s recent financial success has been attributed to its Consumer Banking segment, which continues to deliver solid organic growth. For the last 23 successive quarters, the bank has been adding net new consumer checking accounts, which is helping in expanding BAC’s market share. During the first nine months of 2024, the bank added more than 880,000 net new checking accounts.
Investment balances for consumer clients in Q3 climbed 28% year-over-year, to a record $497 billion, driven by strong inflows of $29 billion over the past 12 months. The company’s overall outlook for the backend of 2024 and the start of 2025 appeared encouraging to investors and this was reflected in Diamond Hill Large Cap Strategy’s remarks in its Q2 2024 investor letter:
“Other top contributors in Q2 included Bank of America Corporation (NYSE:BAC) and Extra Space Storage. Shares of financial services company Bank of America rose in the quarter as it looks increasingly likely net interest income will inflect and begin growing again in 2024’s back half and into 2025.”
According to Insider Monkey’s database for Q3 2024, 98 hedge funds held a stake in the company, up from 92 at the end of Q2. Wall Street analysts are bullish on the stock heading in 2025, with a consensus Buy rating and an average share price upside potential of 3%.
Overall, BAC ranks 2nd on our list of best bank stocks to buy in 2025. While we acknowledge the potential of banking companies, our conviction lies in the belief that 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.
