◆ What the Market Isn't Pricing In

Bank of America (BAC) — the variant view

Bank of America trades at a discount for a return gap that comes from cost rather than funding, and cost is the kind of gap a bank can close.

📈 BAC valuation, revenue & earnings — P/E, P/S, revenue, EPS →

The market prices Bank of America as a bank with a problem it cannot fix, and the evidence says the problem is fixable. The shares traded at 12.95 times trailing earnings and 1.89 times tangible book in September 202612, against 14.5 times earnings for JPMorgan3.

Berkshire Hathaway holding of BAC (millions of shares)1,033Jun 2024798Sep 2024605Jun 2025517Dec 2025483Jun 2026Berkshire Hathaway 13F-HR information tables; sums of BAC rows
Berkshire has halved its stake in two years.

The usual explanation for the discount is that Bank of America's franchise is weaker. Its funding is not: the cost of its total deposits was about 1.74% in 2025 against JPMorgan's 1.80%45. What is weaker is its cost base, an efficiency ratio of 61.65% against JPMorgan's 52% overhead ratio67, and that is improving: 59% in the second quarter of 20268. A gap in cost is a management problem; a gap in funding would be a structural one.

The second shadow is Berkshire Hathaway. Its 13F filings show it held about 1.03 billion shares at the end of June 20249, began selling in the third quarter10, and held about 483 million at the end of June 202611, a reduction of about 53%12. Berkshire first bought in 2011 and exercised warrants for 700 million shares at $7.14 in 201713. A seller who paid $7.14 a share has reasons to sell that have nothing to do with the deposit franchise.

The balance-sheet scar is also healing faster than it looks. The held-to-maturity book was $505.8 billion in June 2026 against a peak of $674.6 billion1415, and each dollar that matures is reinvested at current yields.

Berkshire is still a large holder. The 2026 proxy statement listed Warren E. Buffett and Berkshire Hathaway at 7.9% of the common stock, behind Vanguard at 9.1% and ahead of BlackRock at 6.9%16. The selling since has reduced that stake, but it has been orderly, spread over eight consecutive quarterly filings.

What the market may be missing is that the return gap is closing: return on tangible common equity was 17.03% in the second quarter17. The number that would prove the market right is a full year back below 14%; one at 16% or more would say the discount was for a problem already solved.

References
  1. ReportedThe shares traded at 12.95 times trailing earnings and 1.89 times tangible book in September 2026, against 14.5 times earnings for JPMorgan.
    Bank of America (BAC) market data - $56.03 at the close on 24 September 2026, market cap $391.80B, trailing P/E 12.95. — September 2026 · publ. 24 September 2026 · source ↗
  2. ReportedThe shares traded at 12.95 times trailing earnings and 1.89 times tangible book in September 2026, against 14.5 times earnings for JPMorgan.
    Bank of America (BAC) statistics - price to book 1.42, price to tangible book 1.89. — September 2026 · publ. 24 September 2026 · source ↗
  3. Third-party estimateThe shares traded at 12.95 times trailing earnings and 1.89 times tangible book in September 2026, against 14.5 times earnings for JPMorgan.
    companiesmarketcap, Bank of America P/E ratio and peer P/E ratios (JPMorgan 14.5, Wells Fargo 11.8, Citigroup 14.0). — September 2026 · publ. September 2026 · source ↗
  4. Moat Explorer calcIts funding is not: the cost of its total deposits was about 1.74% in 2025 against JPMorgan's 1.80%.
    Moat Explorer calculation from Bank of America's reported figures ($ millions unless stated). Deposits: cost of total deposits = interest on interest-bearing deposits / (average interest-bearing + average noninterest-bearing deposits): 2019 7,188 / 1,380,326 = 0.52%; 2021 537 / 1,914,286 = 0.03%; 2022 4,718 / 1,986,158 = 0.24%; 2023 26,163 / 1,887,541 = 1.39%; 2024 38,442 / 1,924,106 = 2.00%; 2025 34,513 / 1,984,182 = 1.74% (1,469,705 + 514,477 = 1,984,182, about $1.98 trillion). Average total deposits 2015 1,155,860; 2021 1,914,286; 2022 1,986,158 (about $1.99 trillion); 2015 to 2025 1,984,182 / 1,155,860 - 1 = 72%. Noninterest-bearing share 744,035 / 1,914,286 = 38.9% (2021); 514,477 / 1,984,182 = 25.9% (2025). Noninterest-bearing decline 751,470 - 514,477 = 236,993 (about $237 billion). JPMorgan comparison: deposit cost gap 1.80% - 1.74% = 0.06 points; 0.0006 x 1,984,182 = about 1,190 (about $1.2 billion). JPMorgan revenue per dollar of average deposits 182,447 / 2,506,565 = 7.3 cents; Bank of America 113,097 / 1,984,182 = 5.7 cents. JPMorgan year-end deposits 2,559,320 / 2,018,729 - 1 = 27%; revenue 182,447 / 113,097 - 1 = 61%; market value 935.79 / 391.80 = 2.4 times. Net income margin JPMorgan 57,048 / 182,447 = 31.3%; Bank of America 30,509 / 113,097 = 27.0%. Efficiency gap 61.65% - 52% = 9.65 points x 113,097 = about 10,914 (about $10.9 billion). Loans to deposits 1,185,700 / 2,018,729 = 58.7%. Uninsured deposits 723.0 + 134.9 = 857.9 billion; 857.9 / 2,018.7 = 42.5%; insured and other 2,018.7 - 857.9 = 1,160.8 billion. Consumer deposits per checking account 957.0 billion / 38.7 million = about $24,700. Securities: held-to-maturity unrealised loss as a share of common equity 108,596 / 244,800 = 44% (2022); 82,094 / 276,100 = 30% (June 2026). Held-to-maturity amortised cost 2021 674,591 - 2025 522,685 = 151,906 (about $152 billion); 2020 438,279 to 2021 674,591 = +236,312 (about $236 billion); 2021 fair value 665,890 - cost 674,591 = -8,701. Runoff time 505,828 / 34,794 = 14.5 years. Agency MBS share of loss 67,309 / 80,257 = 84%. Net interest income H1 31,742 / 29,113 - 1 = 9.0%. Capital: CET1 headroom (11.2% - 10.0%) x 1,792 billion = about 21.5 billion; 2027 minimum 4.5% + 3.5% + 2.5% = 10.5%. Capital returned 2025 (8.1 + 21.433) / 29.055 = 101% of net income to common. Average diluted shares 7,680.9 / 11,236.2 - 1 = -31.6%. EPS growth (3.81 / 1.31)^(1/10) - 1 = 11.3% a year. Price to tangible book 56.03 / 29.37 = 1.91. Revenue 2023 102,769 to 2025 113,097 = +10%. Compensation 42,346 / 69,727 = 61% of noninterest expense. Financial centers 3,530 / 3,664 - 1 = -3.7%. Noninterest expense Q2 2026 18,627 / 17,183 - 1 = 8.4%. Berkshire holding 483,394,015 / 1,032,852,006 - 1 = -53%. Investment banking fees Q2 2025 implied 2.1 / 1.5 = 1.4 billion. Segments (FTE, 2025): segment revenue 43,673 + 24,883 + 24,108 + 24,096 = 116,760; less All Other 3,054 = 113,706; less FTE adjustment 609 = 113,097. Shares of total FTE revenue: Consumer 43,673 / 113,706 = 38.4%; GWIM 24,883 / 113,706 = 21.9%. Shares of net income 30,509: Consumer 12,245 = 40.1%; Global Banking 7,793 = 25.5%; Global Markets 6,111 = 20.0%; GWIM 4,670 = 15.3%. Net income margins: Consumer 12,245 / 43,673 = 28.0%; GWIM 4,670 / 24,883 = 18.8% (2024 4,263 / 22,929 = 18.6%; 2023 3,947 / 21,105 = 18.7%); Global Banking 7,793 / 24,108 = 32.3%; Global Markets 6,111 / 24,096 = 25.4%. Consumer net interest income 35,309 / 43,673 = 81%; Consumer provision 4,649 / 5,675 = 82%. Growth 2023-2025: Consumer 43,673 / 42,031 - 1 = 3.9%; GWIM 24,883 / 21,105 - 1 = 17.9%; Global Markets 24,096 / 19,533 - 1 = 23.4%; Global Banking net income 7,793 / 10,072 - 1 = -23%. Consumer H1 2026 revenue 11,336 + 11,049 = 22,385. GWIM net interest income 7,197 / 24,883 = 29%. Revenue per dollar of year-end assets: Global Markets 24,096 / 1,032,858 = 2.3 cents; Consumer 43,673 / 1,039,346 = 4.2 cents. GWIM client balances 4,751,394 / 4,252,106 - 1 = 11.7%, increase 499,288; net flows 81,997 / 4,252,106 = 1.9%; consumer investment assets 639.5 / 599.1 - 1 = 6.7%. Revenue per dollar of balances: Private Bank 4,167 / 759,082 = 0.55%; Merrill 20,716 / 3,992,312 = 0.52%; Private Bank share of GWIM balances 759,082 / 4,751,394 = 16% and revenue 4,167 / 24,883 = 17%. Investment and brokerage services 19,956 / 17,766 - 1 = 12.3%. Common equity 277,251 / total assets 3,411,738 = 8.1%. AUM net flows 81,997 / 2,177,708 = 3.8%. Held-to-maturity loss 2023 97,994 / 263,249 = 37%. Share price 56.03 / 52-week high 65.23 - 1 = -14%. First half 2026 (Q1 + Q2): Consumer Banking revenue 11,049 + 11,336 = 22,385 and net income 3,060 + 3,281 = 6,341; Global Banking net income 2,087 + 2,046 = 4,133; Global Markets revenue 7,109 + 8,022 = 15,131 - deposits, deposit cost and the securities book. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Bank of America's Forms 10-K and 10-Q, earnings releases, JPMorgan's 10-K, Berkshire 13F tables and market data; operands shown in the source line.
  5. ReportedIts funding is not: the cost of its total deposits was about 1.74% in 2025 against JPMorgan's 1.80%.
    JPMorgan Chase Form 10-K for fiscal 2025 - deposits, deposit cost, ROTCE, overhead ratio, CET1, net charge-offs, revenue and net income. — FY2025 · publ. February 2026 · source ↗
  6. ReportedWhat is weaker is its cost base, an efficiency ratio of 61.65% against JPMorgan's 52% overhead ratio, and that is improving: 59% in the second quarter of 2026.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  7. ReportedWhat is weaker is its cost base, an efficiency ratio of 61.65% against JPMorgan's 52% overhead ratio, and that is improving: 59% in the second quarter of 2026.
    JPMorgan Chase Form 10-K for fiscal 2025 - deposits, deposit cost, ROTCE, overhead ratio, CET1, net charge-offs, revenue and net income. — FY2025 · publ. February 2026 · source ↗
  8. ReportedWhat is weaker is its cost base, an efficiency ratio of 61.65% against JPMorgan's 52% overhead ratio, and that is improving: 59% in the second quarter of 2026.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
  9. ReportedIts 13F filings show it held about 1.03 billion shares at the end of June 2024, began selling in the third quarter, and held about 483 million at the end of June 2026, a reduction of about 53%.
    Berkshire Hathaway Form 13F-HR information table, quarter ended 30 June 2024 - Bank of America holdings (about 1.03 billion shares, sum of rows). — Q2 2024 · publ. August 2024 · source ↗
  10. ReportedIts 13F filings show it held about 1.03 billion shares at the end of June 2024, began selling in the third quarter, and held about 483 million at the end of June 2026, a reduction of about 53%.
    Berkshire Hathaway Form 13F-HR information table, quarter ended 30 September 2024 - Bank of America holdings (about 798 million shares, sum of rows). — Q3 2024 · publ. November 2024 · source ↗
  11. ReportedIts 13F filings show it held about 1.03 billion shares at the end of June 2024, began selling in the third quarter, and held about 483 million at the end of June 2026, a reduction of about 53%.
    Berkshire Hathaway Form 13F-HR information table, quarter ended 30 June 2026 - Bank of America holdings (about 483 million shares, sum of rows). — Q2 2026 · publ. August 2026 · source ↗
  12. Moat Explorer calcIts 13F filings show it held about 1.03 billion shares at the end of June 2024, began selling in the third quarter, and held about 483 million at the end of June 2026, a reduction of about 53%.
    Moat Explorer calculation from Bank of America's reported figures ($ millions unless stated). Deposits: cost of total deposits = interest on interest-bearing deposits / (average interest-bearing + average noninterest-bearing deposits): 2019 7,188 / 1,380,326 = 0.52%; 2021 537 / 1,914,286 = 0.03%; 2022 4,718 / 1,986,158 = 0.24%; 2023 26,163 / 1,887,541 = 1.39%; 2024 38,442 / 1,924,106 = 2.00%; 2025 34,513 / 1,984,182 = 1.74% (1,469,705 + 514,477 = 1,984,182, about $1.98 trillion). Average total deposits 2015 1,155,860; 2021 1,914,286; 2022 1,986,158 (about $1.99 trillion); 2015 to 2025 1,984,182 / 1,155,860 - 1 = 72%. Noninterest-bearing share 744,035 / 1,914,286 = 38.9% (2021); 514,477 / 1,984,182 = 25.9% (2025). Noninterest-bearing decline 751,470 - 514,477 = 236,993 (about $237 billion). JPMorgan comparison: deposit cost gap 1.80% - 1.74% = 0.06 points; 0.0006 x 1,984,182 = about 1,190 (about $1.2 billion). JPMorgan revenue per dollar of average deposits 182,447 / 2,506,565 = 7.3 cents; Bank of America 113,097 / 1,984,182 = 5.7 cents. JPMorgan year-end deposits 2,559,320 / 2,018,729 - 1 = 27%; revenue 182,447 / 113,097 - 1 = 61%; market value 935.79 / 391.80 = 2.4 times. Net income margin JPMorgan 57,048 / 182,447 = 31.3%; Bank of America 30,509 / 113,097 = 27.0%. Efficiency gap 61.65% - 52% = 9.65 points x 113,097 = about 10,914 (about $10.9 billion). Loans to deposits 1,185,700 / 2,018,729 = 58.7%. Uninsured deposits 723.0 + 134.9 = 857.9 billion; 857.9 / 2,018.7 = 42.5%; insured and other 2,018.7 - 857.9 = 1,160.8 billion. Consumer deposits per checking account 957.0 billion / 38.7 million = about $24,700. Securities: held-to-maturity unrealised loss as a share of common equity 108,596 / 244,800 = 44% (2022); 82,094 / 276,100 = 30% (June 2026). Held-to-maturity amortised cost 2021 674,591 - 2025 522,685 = 151,906 (about $152 billion); 2020 438,279 to 2021 674,591 = +236,312 (about $236 billion); 2021 fair value 665,890 - cost 674,591 = -8,701. Runoff time 505,828 / 34,794 = 14.5 years. Agency MBS share of loss 67,309 / 80,257 = 84%. Net interest income H1 31,742 / 29,113 - 1 = 9.0%. Capital: CET1 headroom (11.2% - 10.0%) x 1,792 billion = about 21.5 billion; 2027 minimum 4.5% + 3.5% + 2.5% = 10.5%. Capital returned 2025 (8.1 + 21.433) / 29.055 = 101% of net income to common. Average diluted shares 7,680.9 / 11,236.2 - 1 = -31.6%. EPS growth (3.81 / 1.31)^(1/10) - 1 = 11.3% a year. Price to tangible book 56.03 / 29.37 = 1.91. Revenue 2023 102,769 to 2025 113,097 = +10%. Compensation 42,346 / 69,727 = 61% of noninterest expense. Financial centers 3,530 / 3,664 - 1 = -3.7%. Noninterest expense Q2 2026 18,627 / 17,183 - 1 = 8.4%. Berkshire holding 483,394,015 / 1,032,852,006 - 1 = -53%. Investment banking fees Q2 2025 implied 2.1 / 1.5 = 1.4 billion. Segments (FTE, 2025): segment revenue 43,673 + 24,883 + 24,108 + 24,096 = 116,760; less All Other 3,054 = 113,706; less FTE adjustment 609 = 113,097. Shares of total FTE revenue: Consumer 43,673 / 113,706 = 38.4%; GWIM 24,883 / 113,706 = 21.9%. Shares of net income 30,509: Consumer 12,245 = 40.1%; Global Banking 7,793 = 25.5%; Global Markets 6,111 = 20.0%; GWIM 4,670 = 15.3%. Net income margins: Consumer 12,245 / 43,673 = 28.0%; GWIM 4,670 / 24,883 = 18.8% (2024 4,263 / 22,929 = 18.6%; 2023 3,947 / 21,105 = 18.7%); Global Banking 7,793 / 24,108 = 32.3%; Global Markets 6,111 / 24,096 = 25.4%. Consumer net interest income 35,309 / 43,673 = 81%; Consumer provision 4,649 / 5,675 = 82%. Growth 2023-2025: Consumer 43,673 / 42,031 - 1 = 3.9%; GWIM 24,883 / 21,105 - 1 = 17.9%; Global Markets 24,096 / 19,533 - 1 = 23.4%; Global Banking net income 7,793 / 10,072 - 1 = -23%. Consumer H1 2026 revenue 11,336 + 11,049 = 22,385. GWIM net interest income 7,197 / 24,883 = 29%. Revenue per dollar of year-end assets: Global Markets 24,096 / 1,032,858 = 2.3 cents; Consumer 43,673 / 1,039,346 = 4.2 cents. GWIM client balances 4,751,394 / 4,252,106 - 1 = 11.7%, increase 499,288; net flows 81,997 / 4,252,106 = 1.9%; consumer investment assets 639.5 / 599.1 - 1 = 6.7%. Revenue per dollar of balances: Private Bank 4,167 / 759,082 = 0.55%; Merrill 20,716 / 3,992,312 = 0.52%; Private Bank share of GWIM balances 759,082 / 4,751,394 = 16% and revenue 4,167 / 24,883 = 17%. Investment and brokerage services 19,956 / 17,766 - 1 = 12.3%. Common equity 277,251 / total assets 3,411,738 = 8.1%. AUM net flows 81,997 / 2,177,708 = 3.8%. Held-to-maturity loss 2023 97,994 / 263,249 = 37%. Share price 56.03 / 52-week high 65.23 - 1 = -14%. First half 2026 (Q1 + Q2): Consumer Banking revenue 11,049 + 11,336 = 22,385 and net income 3,060 + 3,281 = 6,341; Global Banking net income 2,087 + 2,046 = 4,133; Global Markets revenue 7,109 + 8,022 = 15,131 - capital, valuation, returns and comparisons with JPMorgan. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Bank of America's Forms 10-K and 10-Q, earnings releases, JPMorgan's 10-K, Berkshire 13F tables and market data; operands shown in the source line.
  13. ReportedBerkshire first bought in 2011 and exercised warrants for 700 million shares at $7.14 in 2017.
    CNBC, Berkshire Hathaway exercises warrants for 700 million Bank of America shares at $7.14. — June 2017 · publ. 30 June 2017 · source ↗
  14. ReportedThe held-to-maturity book was $505.8 billion in June 2026 against a peak of $674.6 billion, and each dollar that matures is reinvested at current yields.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  15. ReportedThe held-to-maturity book was $505.8 billion in June 2026 against a peak of $674.6 billion, and each dollar that matures is reinvested at current yields.
    Bank of America Form 10-K for fiscal 2022 - held-to-maturity securities at end-2021 and segment figures for 2020, including the 2020 provision for credit losses. — FY2022 · publ. February 2023 · source ↗
  16. ReportedThe 2026 proxy statement listed Warren E. Buffett and Berkshire Hathaway at 7.9% of the common stock, behind Vanguard at 9.1% and ahead of BlackRock at 6.9%.
    Bank of America 2026 proxy statement (DEF 14A) - executive compensation. — 2026 · publ. March 2026 · source ↗
  17. ReportedWhat the market may be missing is that the return gap is closing: return on tangible common equity was 17.03% in the second quarter.
    Bank of America second-quarter 2026 supplemental information, Form 8-K exhibit 99.3 - quarterly and half-year financial highlights and ROTCE. — Q2 2026 · publ. 14 July 2026 · source ↗
Sources
Generated September 25, 2026