As bank earnings season approaches, volatility is expected.
Short Hills Capital's Steve Weiss plans to hold Bank Of America Corp (NYSE:BAC) stock for its long-term upside potential, despite anticipating a move lower short term. He explained his reasoning Monday on CNBC's "Fast Money Halftime Report."
What's Ahead: Weiss would be surprised if the stock didn't decline on the company's upcoming earnings report.
"I don't expect optimism about the near-term pipeline in banking," Weiss said. "There's another negative also, which is that if you talk to any senior wealth manager that's got a big book at the big banks, they'll tell you they've driven a lot of their revenues through lending."
Bank Of America is able to lend billionaires and other wealthy individuals money at such low rates that there is strong demand for that capital, he explained.
"As those rates go up, that business is going to decline somewhat," Weiss said.
See Also: US Banks Warn On Plummeting Investment Banking Revenues As Dealmaking Dries Up: FT
Longer-Term Outlook: Weiss' main thesis for holding the stock is that he maintains an expectation for a steepening yield curve, he said, adding that Bank Of America will make money on the spread.
Weiss also expects many of the third-party lenders to fall off, he said: "The credit profile of their businesses is going to decline meaningfully, so that's why I like it, I think they'll pick up share."
Bank Of America is set to announce its first-quarter financial results before the market opens on April 18, according to data from Benzinga Pro.
BAC Price Action: Bank Of America has traded between $36.51 and $50.11 over a 52-week period.
The stock was up 0.06% at $39.70 at time of publication.
Photo: Tony Webster from Flickr.
