The ongoing Russia-Ukraine conflict, impending interest rate hike by the Federal Reserve and the increase in Covid cases are the major headwinds weighing on the overall investor sentiments. This has resulted in a major sell-off across all sectors except energy.

Amid the recent dip in the share prices, investors should look for stocks that reflect strong fundamentals and will grow once the current headwinds and uncertainties cool off. So, today we are discussing one such stock from the finance sector (which will benefit from the rising rates) – Bank of America (BAC).

One of the largest U.S. banks in terms of market cap and assets, Bank of America is well-positioned to gain immensely from higher interest rates.  Now, let’s discuss in detail why Bank of America stock is a great pick amid the recent sell-off.

Trading Way Below 52-Week High: Bank of America stock currently trades way below its 52-week high, which reflects its potential to go upward. The stock’s closing price of $40.33 on Mar 11 is 20% lower than the 52-week high of $50.11 attained on Feb 10, 2022.

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Image Source: Zacks Investment Research

Attractive Valuation: At $40.33 per share, Bank of America is currently trading at a price/tangible book value of 1.90X, below the industry average of 2.02X. Thus, the company’s beaten-down stock price and attractive valuation might be a good entry point for investors.

Robust Fundamental Growth Drivers: Bank of America continues to align its banking center network according to customer needs. These initiatives, along with the success of Zelle and Erica, have enabled it to improve digital offerings and cross-sell several products, including mortgages, auto loans and credit cards. The acquisition of Axia Technologies has further strengthened its healthcare payments business.

Bank of America is immensely benefiting from the global deal-making frenzy. Per the Dealogic data, its global investment banking (IB) fee market share has improved 35 basis points from the 2019 level to 6.4% in 2021. With deal-making and underwriting business anticipated to continue at a solid pace, the company is likely to record steady growth in IB fees.

Prudent cost management continues to support the bank’s financials. Its expense-saving plan – Project New BAC (launched in 2011) – helped improve the overall efficiency. Over the last several quarters, Bank of America has incurred on an average $14 billion in expenses, despite undertaking strategic growth initiatives. While total non-interest expenses increased in 2021, management expects the same to be relatively stable this year.

Steady Capital Deployments: In July 2021, following the Fed’s approval, BAC announced a dividend hike of 17% to 21 cents per share. Based on the last day’s closing price, the dividend yield currently stands at 2.08%.

Also, in October 2021, the company's share repurchase plan of $25 billion was renewed. During 2021, Bank of America returned $31.7 billion to shareholders in the form of buybacks and dividend payouts. Given the strong balance sheet and earnings strength, the company will be able to sustain enhanced capital deployment plans.

Solid Rank & Growth Score: Bank of America currently carries a Zacks Rank #2 (Buy) and has a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the bank appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Favorable Estimate Revision & Surprise History: Analysts seem bullish on the stock. Over the past month, the Zacks Consensus Estimate for earnings has moved almost 1% and 1.6% north for 2022 and 2023, respectively. Its projected long-term earnings per share growth rate is 7%.

Further, Bank of America has an impressive earnings surprise history. The company outpaced estimates in each of the trailing four quarters, delivering an earnings surprise of 23.42%, on average.

Conclusion

Considering Bank of America’s growth prospects and robust fundamentals, one can add the stock to the portfolio for long-term gains. Also, the company’s efforts to improve revenues, strong balance sheet and expansion into new markets will support growth.

Other Banks Worth a Look

A couple of other banks worth considering amid the current market backdrop are Associated Banc-Corp (ASB) and Zions Bancorporation (ZION).

Associated Banc-Corp currently sports a Zacks Rank #1. The Zacks Consensus Estimate for 2022 earnings has moved 1.2% upward to $1.71 over the past 30 days. So far this year, ASB’s shares have gained 2.7%.

Zions carries a Zacks Rank #2 at present. The Zacks Consensus Estimate for 2022 earnings has been revised nearly 1% upward to $4.96 over the past month. ZION’s shares have rallied 1.7% in the year-to-date period.