Do charitable, civic-minded, employee-conscious companies really perform better? We’ll soon find out — again — this time with Bank of America (NYSE:BAC) as the test subject. BAC has recently announced several ethically conscious initiatives, including a higher minimum wage for employees. They will take a while to pay off, but investors willing to bet good corporate citizens also make for good investments may want to go ahead and step into Bank of America stock now rather than later, even in front of next week’s earnings report.
Granted, BAC stock was a fine investment before it recently turned up the heat on doing good work beyond the bottom line. Since taking the helm in 2010, CEO Brian Moynihan has dragged the company out of the subprime mortgage-meltdown mire and made it the lean, mean banking machine it was in its glory days.
Now back on a solid footing, Bank of America can afford to up the ante on altruism.
It’s entirely possible Bank of America has timed the unveiling of several new initiatives to coincide with the fact that it and its peers are currently in the white-hot spotlight of government scrutiny. Today, Moynihan along with top executives from rivals Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), Goldman Sachs Group (NYSE:GS), JPMorgan Chase (NYSE:JPM) and others are set to face tough questions from the House Financial Services Committee on “holding megabanks accountable“.
At the very least, Brian Moynihan will be able to point to a handful of initiatives that make clear Bank of America isn’t evil-incarnate. One of those initiatives is a plan to raise the minimum hourly wage for all B of A employees to $20 by 2021.
Where Bank of America is becoming really generous, however, is outside of the company.
Case in point: Between now and 2030, B of A says it will deploy $300 billion toward low-carbon initiatives. That’s more than twice the amount it’s spent shrink its carbon footprint since 2007. The company has also earmarked $5 billion to be used in support of home ownership in low and moderate income areas, to be deployed over the course of the coming five years.
While such spending shaves profits right off the bottom line, current and prospective owners of Bank of America stock can take solace in the fact that these expenses often more than pay for themselves.
More so than any other generation, millennials make a point of doing business with organizations that demonstrate good corporate citizenship. A 2017 survey performed by MacKenzie indicated that 76% of millennials see businesses as an agent to make a positive social impact. Millennials who feel their employers supports charitable initiatives are also more loyal to their organization.
It’s also, of course, just good business to be even moderately generous with hourly workers.
Costco Wholesale (NASDAQ:COST) is an outstanding example. Perpetually trapped between Amazon.com (NASDAQ:AMZN) and Walmart (NYSE:WMT) — where it shouldn’t have survived — above-average wages for in-store workers made a surprising difference not just in its survival, but its growth.
Walmart finally figured out just a few years back that even a slightly higher hourly wage would inspire considerably better employee engagement. With a years-long head start, however, COST stock has continued to outperform.
Looking Ahead for Bank of America Stock
Bank of America will report last quarter’s earnings on the morning of Tuesday, April 16th. Analysts are looking for revenue to grow from $23.27 billion to $23.33 billion, which should be enough to boost profits from 62 cents to 66 cents per share of Bank of America stock.
None of the aforementioned initiatives will make any impact on those results, but undoubtedly they’ll be mentioned… and emphasized should the House’s Financial Committee hearing end up casting an ugly light on the banking industry.
Either way, though it will take some time, the more-civic-minded Bank of America may surprise investors by posting impressive growth results specifically because of these efforts.
In the meantime, the fact that it’s just a good banking operation bolsters the bullish case.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
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