Q4 Preview: BofA (BAC) Could Top on One-Time Gains, But Mortgage-Related Costs Linger

Shares of Bank of America (NYSE: BAC) are higher Wednesday ahead of its fourth-quarter earnings announcement, expected out before the market opens Thursday morning.

The Street is currently modeling for BofA to report earnings of 15 cents per share on revenue of $24.08 billion. Earnings -- if in-line with expectations -- would mark a 7.1 percent gain from the same period last year.

BofA shares fell 9 percent to $5.56 at the end of December. The stock is up 21 percent since, but ended 2011 down 58 percent. BofA shares have traded within a range of $4.92 to $15.16 over the last 52-week time frame.

At the end of last quarter, BofA reported Tier 1 common ratio of 8.65 percent, common equity ratio at 9.50 percent, and tangible equity common ratio at 6.25 percent.

Data from Bloomberg has 14 analysts with a Buy rating on BofA, 21 at Hold, and two with a Sell-equivalent rating. The Street's price target average is $9, with a low of $6.50 and high of $14.50.

Analyst Comments

• Deutsche Bank sees earnings of 38 cents per share, which excludes merger charges and CVA/DVA. Deutsche notes a number of one-time gains which are probably not reflected in Street estimates. The firm comments, "Underlying trends are likely to be sluggish, reflecting ongoing high mortgage-related costs and weak capital markets revenue. On a positive note, we expect capital to come in a bit higher than expected (at 9.5% Tier 1 common, under Basel 1)."
  
  BofA is said to expect fourth-quarter net income levels to mitigate back to second-quarter levels of about $11.5 billion following some one-time events last quarter. Deutsche stated, "Recall that third-quarter results included losses from faster modeled prepayments (a 13bp NIM hit) and asset hedge ineffectiveness (-11bps)." The firm is also modeling for expenses to be down about 1 percent from the third-quarter, "as elevated mortgage-related expenses should be offset by efficiency initiatives, headcount reductions, and likely lower incentive comp."
  
  
• JPMorgan sees earnings of 28 cents per share in the quarter. The firm said it sees BofA trading at a discount near-term "due to continued headline risk, mortgage related headwinds and continued pressure on revenues, particularly markets related fees."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out BofA's past performance at Streetinsider's BofA's Income Statement.

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