To The Moon

BRK.B’s Continued BAC Exit

Under new $Berkshire Hathaway(BRK.B)$ CEO Greg Abel, the continued reduction of $Bank of America(BAC)$ is the most conspicuous portfolio decision heading into BAC’s Q3 2026 earnings report.

BRK.B’s Q2 2026 13F showed a sale of about 30.2 million BAC shares, equivalent to a -5.9% reduction and roughly $1.7 billion at quarter-end prices.

It was BRK.B’s largest dollar reduction during the quarter.

The sale continued the disciplined approach set by Warren Buffett.

BRK.B owned just over 1.03 billion BAC shares in mid-2024 and has reduced its stake every quarter since.

• By the end of June 2026, it held 483.4 million shares, less than half of its earlier position.

• The Q2 filing marked the 8th straight quarter of share reductions.

Despite the sales, BAC remained one of BRK.B's largest holdings, worth about $27.5 billion as of 30 Jun 2026.

BRK.B disposal of BAC’s reason appears to be portfolio preference rather than an outright warning about BAC’s viability.

• Case in point - Abel also cut positions in Capital One & Kroger, stocks that had been unchanged for at least a year.

• This suggests a broader reallocation rather than a BAC-specific credit or earnings concern.

Still, BAC’s stake halved over roughly 2 years by 2 different CEOs is a meaningful signal:

• BRK.B sees better uses for its capital elsewhere, even while retaining a very large BAC position.

Q3 Forecast: Softer Quarter ?

BAC will report its Q3 earnings on Wed, 14 Oct 2026, before US market opens.

Analyst’s estimates for Q3 2026 so far:

• Revenue will be approx. $30.6 billion.

• Earnings per share (diluted) is expected to be between $1.11 – $1.12.

This implies a marked QoQ slowdown, when BAC earned:

• Revenue of $31.6 billion.

• Net income was $9.1 billion.

• Earnings per share (diluted) was $1.21.

Based on actuals, expected revenue decline more than $1 billion and EPS decline about -$0.09; underscoring a tougher quarter.

Q3 2026 vs Q2 2026:

• Revenue fell by -3.16%.

• EPS fell by -7.85%.

Against Q3 2025, the comparison is more constructive but still reflects deceleration.

• Revenue was $28.24 billion.

• Net income was $8.5 billion.

• Earnings per share was $1.06.

Q3 2025 vs Q3 2026:

• Revenue will rise by roughly +8.35% YoY.

• EPS gain will be between 5.0% - 6.0% YoY.

Investment Banking - the Swing Factor

The clearest reason for the expected sequential and year-over-year moderation is capital markets.

On 14 Sep 2026, CEO Brian Moynihan said that:

• Investment banking fees were expected to fall at least -10% YoY, to about $1.6 – $1.8 billion from Q3 2025’s $2 billion.

• BAC could underperform the broader investment-banking market, because it is less well positioned in some of the more active businesses.

• Sales & trading is expected to remain approximately flat at around $5.4 billion, compared with Q2 2026’s $7.1 billion generated - a sharp reversal from a quarter-ago where businesses rose +33.0% and investment banking fees rose +50%, supported by debt underwriting & advisory activity.

• Q3 setup has effectively removed much of the extraordinary capital-markets tailwind that helped produce BAC’s exceptional Q2 2026 earnings.

Nevertheless, the nuance is still important:

• Moynihan still described the investment-banking pipeline as strong in September 2026.

• Higher interest rates may delay financings rather than eliminate demand.

• If transactions are postponed, some revenue could reappear in later quarters.

• However, if financing conditions deteriorate further, the weakness could become more persistent.

Is there a pattern formation amongst the US big banks when it comes to quarterly earnings?

• $JPMorgan Chase(JPM)$ is confirmed weaker sequentially (QoQ) compared to Q2 2026, which had been an exceptionally high-water mark featuring a massive cyclical surge in equities trading & investment banking fees.

• Fact - JPM’s Q3 2026 investment banking fees fell roughly -8.0% compared to Q2 2026.

• For a recap of JPM’s Q3 earnings forecast and actuals, click here ! to read & know.

NII To Carry Q3 Quarter ?

Net interest income (NII) is seen as the pivotal variable. First it was for JPM and now BAC.

Management expects FY 2026’s NII growth near the upper end of its 6% – 8% guidance range.

Supporting fundamentals remain intact:

• Average loans and leases rose +8.0% YoY to $1.22 trillion in Q2 2026.

• Every major segment contributing, while average deposits reached $2.02 trillion.

• Extended BAC’s consecutive quarterly deposit-growth record to 12 quarters.

BAC is asset-sensitive, so higher rates should benefit NII as interest-earning assets reprice faster than liabilities.

Its large, low-cost deposit base is a structural advantage, but rising bond yields can raise funding costs and partially offset the benefit from higher asset yields.

The Q3 report will be scrutinized for (a) net interest margin, (b) deposit pricing, and (c) whether management maintains or raises its NII outlook.

A reaffirmation or upgrade would likely be viewed positively; a downgrade would remove the main expected offset to weaker capital-markets revenue.

Credit & Expenses Remain Key Checks

Credit quality is the other major watch item.

In September 2026, BAC Management reaffirmed that consumer spending remained strong and credit quality healthy.

Even so, analysts estimate Q3 nonperforming loans & leases at about $6.46 billion, up from $5.35 billion a year earlier.

While that figure alone does not mean credit quality is worsening, it shows why investors will focus on delinquencies, net charge-offs, provisions, and management’s credit outlook, especially for lower-income households and credit card borrowers facing high borrowing costs and inflation.

Expenses are also key determinant.

• In Q2 2026, non-interest expenses were $18.6 billion, up +8.0% YoY, driven by revenue-related costs and investment in employees, technology, and brand.

Still, BAC produced a +6.6% operating leverage, improved its efficiency ratio to 59% from about 61% in the prior quarter, and delivered a +17.0% return on average tangible common equity.

For impending Q3, the test is whether those efficiency gains persist while BAC roughly doubles its AI expense budget in 2027.

Its AI program - about 140 implemented use cases, roughly $400 million of spending, and an estimated $800 million of benefits, suggests management views technology as a productivity lever rather than a cost center.

My viewpoints: (mine only)

Overall, the Q3 2026 consensus looks reasonable rather than aggressive.

Revenue growth of roughly +8.0% YoY remains solid, and EPS growth of about +5.0% – +6.0% is respectable given management’s explicit warning that investment banking fees will decline at least -10%.

The forecast also embeds a realistic normalization from Q2’s unusually strong trading and dealmaking results, rather than assuming those records repeat.

The more demanding question is whether the estimate fully captures downside risk.

If trading merely stays flat and investment banking falls as guided, NII and expense control must do the work.

The forecast appears to assume that BAC’s deposit franchise, loan growth, and fixed-asset repricing continue to support revenue.

If deposit costs rise faster than expected or credit provisions increase, the $1.11–$1.12 EPS range could prove difficult.

Conversely, because management has lowered the bar for investment banking and trading, even in-line capital-markets revenue plus firm NII guidance could produce a better-than-feared result.

Valuation After +118% Run

On 9 Oct 2026, BAC shares closed at $54.32, gaining +1.32% after a prolonged decline, though the stock remains below key moving averages and has fallen -8.1% over the past month. (see below)

Past 3 months performances

That recent weakness has improved the entry point, but it does not erase the fact that the stock has gained +118.1% over the past 3 years. (see below)

Past 3 years' performances

The valuation case rests on whether BAC continues to earn returns above its cost of equity.

The Excess Returns framework models book value at $39.34 per share, stable book value at $43.42, projected stable EPS of $5.44, and a cost of equity of $3.52.

This means the bank generates $1.92 per share in extra profit, based on an average return on equity of 12.52%.

Under these assumptions, this suggests the stock is worth more than its current $54.32 share price.

Additionally, BAC's 11.8x P/E ratio supports the idea that the stock remains cheap, as long as its earnings quality & credit performance stay strong.

Just remember that the above is a data-modelling-dependent conclusion.

Valuation depends on (1) stable book value compounding, (2) sustained excess returns, and (3) no material deterioration in credit or funding costs.

BAC’s Q3 earnings report will not resolve the long-term valuation debate.

It will however, clarify whether the near-term earnings mix of stronger NII offsetting weaker investment banking, can justify both the +118% run and BRK.B’s decision to keep reducing, rather than exit, its stake.

Technical Analysis.

As usual, I defer to BAC’s technical indicators of (1) Simple Moving Average (SMA), (2) MACD and (3) RSI to find out where is the bank’s trajectory.

Simple Moving Average. (SMA)

On 13 Oct 2026, BAC ended the day at $53.96 per share, lower than its SMAs of (a) 20-day ($55.36), (b) 50-day ($59.75) and (c) 200-day ($55.26).

BAC’s SMA outlook remains bearish, shorter-term SMAs are declining while the 200-day SMA is flattening, signalling a weakening trend.

The approaching 20-day/200-day bearish crossover could reinforce this weakness.

MACD.

Both the MACD line (-1.69) and Signal line (-1.81) remain below Zero line, indicating that underlying momentum is still bearish despite the recent improvement.

A positive light is the MACD line has crossed above the Signal line, producing a bullish crossover.

This suggests downward momentum is weakening and a recovery may be developing, rather than confirming a sustained bullish trend.

With Divergence/histogram at +0.11, the small positive histogram confirms that MACD is above its Signal line, indicating an early upward momentum shift.

RSI.

The 14-day RSI of 31.38 has recovered from below 30 and is now just above the conventional oversold threshold.

This suggests selling pressure is easing and leaves scope for a rebound, but the low reading still reflects weak momentum rather than a confirmed reversal.

Last Possible Impact.

BAC’s Q3 earnings will face a further headwind. (see below)

It has just been reported that BAC has been handed a heavy penalty over money laundering violations.

It will be a $1.2 billion (fine) non-tax-deductible charge, effectively reducing EPS by approximately -$0.17, while remediation costs are already reflected in its expense base.

If the cited $1.11 – $1.12 EPS forecast excludes this charge, reported EPS could fall to roughly $0.94 –$0.95, compounding the expected sequential slowdown.

So, we wait for BAC to dip and then reconsider if its worth a DCA or ?? What do you reckon?

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

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• Do you think BRK.B’s continual selloff & BAC’s weak technicals signal a value trap or an opportunity before sentiment turns? ?

• Do you think BAC’s stronger NII can absorb the $1.2 billion fine, or will Q3 expose cracks beyond a one-off charge?

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