“BofA has cut expenses a lot over the past five years, especially legacy-asset-servicing expenses, which it plans to halve from 1Q15 level to $500 mil per qtr,” JPMorgan’s Vivek Juneja said, according to Barron’s. “If BofA cuts legacy-asset-servicing expenses further to $250 mil, it would add $0.06 to annual EPS and about 100bp to efficiency ratio.”
Goldman Sachs (NYSE: GS) is also expected to generate greater return on equity, compared to its peers, as industries continue to consolidate.
“GS’ opportunities to benefit from continued strength in M&A activities, potential to see greater client activity levels as rates rise, and GS’ greater expense flexibility suggest it will maintain a healthy ROE advantage to its peers,” Wells Fargo’s Matthew Burnell and Jason Harbes said.
BAC and GS make up large components of broader financial sector ETFs. For instance, the Financial Select Sector SPDR (NYSEArca: XLF) includes 5.8% BAC and 2.8% GS.
For more information on the financial sector, visit our financial category.
Max Chen contributed to this article.