Bank of America vs JPMorgan: Which Is the Better Earnings-Season Buy?

Bank of America generated $191.6 billion of revenue in 2025 (broadly in line with 2024) and $30.5 billion of net income, EPS of $4.02 against a current share price of approximately $51. The forward P/E of 12.3x is below the 10-year sector average and well below JPM's premium multiple.

The operational setup heading into the print is favourable. Net interest income expanded approximately 8% in 2025 as the longer-duration component of the asset book repriced. Investment banking activity has accelerated sequentially through Q4 2025 and into Q1 2026, supporting the markets and IB segment revenue trajectory. Consumer credit has held up better than the early-2025 bear case predicted. The Brian Moynihan management team has executed the post-Merrill integration cleanly and the cost discipline has been visible in the efficiency ratio trajectory.

The question for the print is whether the net interest income trajectory carries forward at the recent pace, whether investment banking revenue confirms the sequential acceleration, and whether consumer credit costs remain contained. The Valuation Desk reads the set-up as broadly favourable on all three.

BAC's capital position is robust. CET1 ratio runs at 11.5%, well above the regulatory minimum, with capacity to support a $10-12 billion buyback program annually plus the 2.06% dividend. The capital return envelope is one of the structural advantages of the BAC story; the discount to JPM gives investors a cheaper entry into a similar capital return profile.

JPMorgan generated approximately $180 billion of revenue and $54 billion of net income in 2025. EPS of approximately $19 against a share price near $275 implies the 14.5x forward multiple. The premium to BAC reflects superior return on equity (15-16% vs BAC's 10-11%), a more diversified fee revenue mix, and a better-quality credit book.

The Q1 print confirmed JPM's operational excellence. Investment banking revenue surprised to the upside, consumer credit remained well-behaved, and the markets segment delivered into the seasonal seasonal volatility. Trading revenue benefited from the elevated activity around Treasury policy expectations. Net interest income held within the guided range.

The question is not whether JPM is a better business. It is. The question is whether the price differential adequately compensates for the difference. At 14.5x forward earnings, JPM is priced for a sustained ROE in the 15-16% range. At 12.3x, BAC is priced for a sustained ROE in the 9-10% range. The ROE gap is 500-600 basis points. The multiple gap implies a similar but slightly higher capitalised ROE differential.

The Valuation Desk's read is that BAC's ROE trajectory should improve toward 11-12% over the next 18-24 months as the net interest income accretion compounds. JPM's ROE is closer to its structural ceiling. The narrowing of the ROE gap is the multiple compression case for JPM relative to BAC.

BAC's EPS path: $4.02 in 2025, growing to a consensus $4.40-4.55 in 2026 and $4.85-5.00 in 2027. JPM's EPS path: approximately $19 in 2025, growing to consensus $20.50-21.50 in 2026 and $22-23 in 2027. The growth rates are comparable on a percentage basis (8-10% annually), reflecting that both books benefit from similar underlying drivers.

The market is paying differently for that similar growth profile. At BAC's 12.3x forward, every dollar of incremental EPS is worth $12.30. At JPM's 14.5x, every dollar of incremental EPS is worth $14.50. For investors who believe both names are likely to hit their EPS targets, the cheaper purchase price wins on a per-share basis.

The asymmetry is sharper on the upside-surprise scenario. If both names beat the consensus EPS for 2026 by 5%, BAC's stock benefits by approximately 6% (3% multiple expansion + 5% earnings beat) while JPM's stock benefits by approximately 5% (1% multiple expansion + 5% earnings beat). The discount stock has more multiple expansion potential because it is starting from a more compressed level.

BAC's 2026 buyback program targets approximately $12 billion plus a 2.06% dividend. On a market cap of $385 billion, the total capital return yield runs at 5.2%. JPM's 2026 buyback program targets approximately $20 billion plus a 2.0% dividend. On a market cap of $740 billion, the total capital return yield runs at 4.7%.

BAC's capital return yield is therefore approximately 50 basis points higher than JPM's. That is the carry advantage that compounds for relative outperformance over a multi-year window. The 50 basis point differential might look small on a single-year basis. Over five years, it compounds to a 250-300 basis point cumulative outperformance even before any multiple convergence.

The Valuation Desk reads the capital return yield differential as a structural feature of the comparative set-up. JPM's larger buyback program comes from a stronger absolute earnings base. BAC's relatively higher yield comes from a more compressed multiple. The math favours the cheaper name even before the operational catalysts begin to work.

Both banks operate top-tier US consumer deposit franchises, with BAC carrying approximately $1.95 trillion of deposits versus JPM's roughly $2.45 trillion. The deposit composition is broadly similar, though JPM has a slightly higher share of high-net-worth and corporate deposits, which carry better through-cycle pricing.

The net interest margin (NIM) on the two books has narrowed over the last cycle. BAC's NIM expanded 25-30 basis points through 2025; JPM's expanded 15-20 basis points. The faster expansion at BAC reflects a longer-duration liability book that has repriced more slowly. The implication is that BAC has more remaining accretion in its NIM trajectory than JPM does. That is a forward-looking earnings tailwind that BAC's multiple is not currently pricing.

Deposit beta dynamics are worth noting. Through the 2024-2025 cycle, both banks maintained deposit costs below the most aggressive peer pricing, evidence of franchise stickiness. BAC's deposit beta was approximately 60% versus JPM's 55%. The slightly higher beta for BAC reflects a marginally more rate-sensitive depositor mix. The flip side is that BAC's deposit cost structure is more responsive to rate cuts as well, which would benefit BAC's NIM if the curve flattens further into 2027.

JPM's investment banking and markets revenue is structurally larger and more diversified than BAC's. JPM generated approximately $35 billion of IB and markets revenue in 2025 versus BAC's roughly $20 billion. The difference is partly scale and partly franchise; JPM's M&A advisory, equity capital markets, and prime brokerage businesses are all top-three globally.

This is the area where JPM genuinely earns its multiple premium. The fee revenue mix is higher quality and lower beta to credit cycles than the consumer banking line. BAC's IB business is competitive but does not match JPM's scale in any single sub-segment.

The question for the relative trade is whether the IB/markets advantage is worth the entire 25% multiple premium. The Valuation Desk's view is that it is worth approximately half. The remaining premium is a function of perception and historical anchoring rather than fundamental excess. As BAC's IB business continues to take share at the margin (which it has done modestly through 2024-2025), the perception gap should narrow.

A second angle on the IB/markets comparison worth noting. Return on allocated capital in JPM's CIB segment has averaged 14-16% over the last three years, while BAC's GBGM segment has averaged 11-13%. That 300 basis point ROAC gap is the real economic differential. Capitalised at a reasonable return multiple, it is worth approximately 1.5-2 points of forward P/E, not 2.5 points as the current premium implies.

Both banks entered 2026 with CET1 ratios above 11%, plenty of buffer above the regulatory minimum, and capacity to support buybacks plus selective book growth. BAC's CET1 stood at 11.5% versus JPM's 13.5%. The JPM excess capital position supports a slightly more aggressive buyback program but also reflects the conservative balance sheet philosophy that has defined the franchise.

The more interesting comparison is on duration and rate positioning. BAC has been actively shortening the duration of its asset book through 2024-2025 in anticipation of a fundamental rate-cycle shift. JPM has been more cautious, maintaining a slightly longer asset book. If the rate path follows the consensus easing trajectory through 2026, BAC's positioning is marginally better aligned. If rates surprise to the upside, JPM's positioning is preferred.

The outcome distribution on rate path is roughly balanced over a 12-month window. Neither positioning produces a structurally dominant outcome. But the discount in BAC's multiple compensates for the slightly lower rate-shock optionality.

Historically, when two large bank stocks trade at a 20+ percent multiple gap with similar operating profiles, the cheaper name has outperformed by 400-700 basis points over 24 months in roughly 65% of cases. The pattern is not deterministic but it is favourable, and it shapes the conviction on this trade.

The dividend coverage profiles differ subtly. BAC's dividend coverage runs at approximately 28% of net income; JPM's runs at 27%. Both are conservative and both have capacity to grow faster than earnings over the cycle. The similarity reinforces the relative-value argument: the multiple discount is not compensating for weaker dividend coverage.