Financial Report Outlook | Will AI Help Improve Efficiency in Bank of America Corp (BAC.US) and usher in a new growth cycle?

Bank of America Corp (BAC.US) will release its fourth quarter earnings before the US stock market opens on January 16. Market expectations are for Bank of America Corp to report a Q4 net interest income of $14.18 billion, with revenue estimated at $24.95 billion, a year-on-year growth of approximately 14%. At the same time, net profit is expected to reach $6.28 billion, nearly double from the previous year, with earnings per share at $0.77, a year-on-year increase of 119.29%. It is understood that last year, Bank of America Corp and other large banks recorded billions of dollars in expenses related to a special assessment with the Federal Deposit Insurance Corporation (FDIC). In the previous quarters, Bank of America Corp's performance exceeded expectations due to growth in its wealth management and investment banking divisions. In the last quarter, due to strong performance in the capital markets, underwriting income grew by 24.5%, sales and trading revenue increased by 11.7%, and Bank of America Corp's performance in the third quarter was better than expected, at $0.81 per share. Deposit balances increased by 2.4% year-on-year, reaching $1.9 trillion, highlighting the continued growth of core banking operations. AI Enhancing Efficiency Aside from conventional financial indicators, the current trend of artificial intelligence may also be a key topic of interest in the banking industry. A recent report by Bloomberg Intelligence shows that due to artificial intelligence taking over tasks currently performed by humans, global banks could cut up to 200,000 jobs in the next three to five years. However, what is noteworthy is that the survey results further demonstrate that artificial intelligence has brought about profound changes to the industry, leading to increased profits. BI data shows that by 2027, with artificial intelligence driving productivity improvements, banks' pre-tax profits could be 12% to 17% higher than before, with total profits increasing by $180 billion. Eight out of ten respondents expect that over the next three to five years, generative artificial intelligence will increase productivity and revenue by at least 5%. Despite the controversies surrounding artificial intelligence in the workplace due to the risks of job automation, the fact remains that artificial intelligence is essential for almost all businesses seeking to maintain efficiency. According to a 2023 study, one-third of businesses use AI tools. It is possible that Bank of America Corp's management has also realized this. The management is strongly committed to using artificial intelligence to improve their operations. During an industry conference in mid-December last year, this was a major topic of discussion. Bank of America Corp's Chairman and CEO, Brian Moynihan, stated at an industry conference on December 11, "The whole idea of automation is still very important to us." Moynihan also mentioned in the same industry conference call that the use of Bank of America Corp's virtual assistant, Erica, is still growing at a rate of 5% to 6% annually, with users increasing by 5% to 6% each year, and usage growing by double digits at 15% to 20%. According to FDIC data, net profits for identified commercial banks reached $71.5 billion in the second quarter of 2024. Meanwhile, Bank of America Corp had a net profit of $6.9 billion in the same quarter, meaning the company contributed approximately 9.65% of the industry's profits. Analysts predict that due to cost-cutting measures from artificial intelligence, Bank of America Corp's profits could increase by $17.37 billion annually by 2027, significantly boosting their current profit margin of around $22 billion. Wall Street also has a positive outlook on Bank of America Corp's prospects. As of Monday, 11 out of 12 analysts tracked by Visible Alpha have given a "buy" or equivalent rating, with only one "hold" rating. The average target price is around $52, implying a premium of nearly 16% from Monday's closing price. Over the past 12 months, Bank of America Corp's stock price has risen by over 37%, reaching $45.06.