Bank of America (BAC.US) Q3 earnings may plunge YoY, not surprising given Buffett's sell-off

Bank of America (BAC.US) will report its third-quarter earnings before the market opens on Tuesday, October 15. The consensus estimates are for revenue of $28.3 billion, flat year-over-year; and EPS of $0.77, down 14% year-over-year.

Warren Buffett's Berkshire Hathaway (BRK.A.US) has reportedly reduced its stake in Bank of America to below 10%. As its current stake is below the 10% key threshold, Berkshire no longer needs to report its related trades in a timely manner.

It is known that before recently selling Bank of America shares, Buffett has been selling various long-held bank stocks, including JPMorgan (JPM.US), Goldman (GS.US), Wells Fargo (WFC.US), and U.S. Bancorp (USB.US) in recent years. He has mentioned in multiple occasions that the increased liquidity of deposits and historical financial crises have eroded confidence in the banking system.

Trinity Asset Management investment manager Brian Gilmartin sees a positive sign in the resilience of Bank of America's stock price after Berkshire Hathaway's stake reduction. The stock has risen nearly 27% year-to-date.

Gilmartin believes that Bank of America has faced two main issues in recent years: a liability-sensitive balance sheet and fee management issues. The liability-sensitive balance sheet means that Bank of America's liabilities are repricing faster than its assets, which poses a challenge in the backdrop of rising federal funds rate and yields. Additionally, investors have been demanding Bank of America to improve its cost control.

Since January 1, 2020, major banks such as Bank of America, JPMorgan, and Citigroup (C.US) have not outperformed the S&P 500.

Gilmartin concludes by saying that Bank of America's EPS is expected to grow more strongly in 2025 and 2026 compared to 2024, but investors will still need to wait for further guidance in January 2025.