Bank of America (BAC) reported some disappointing numbers yesterday. Quarterly profits were down by 32% due to credit losses and lack lustre performance in their investment banking division. However, this was still not as bad as Citigroup (C), Washington Mutual (WM) and some of the other banks which have seen profits decline as much as 70%.

The CEO, Kenneth Lewis minced no words about the bank’s performance. “Two-thirds was just mistakes we made in judgment,” Mr. Lewis told analysts on a conference call. “Clearly, we bear a lot of the blame, much more so than just market conditions.” He also promised that things would change, indicating that layoff’s are imminent in the investment banking arm of BofA. For the last decade or so, BAC has been trying to compete with the likes of Goldman Sachs and Morgan Stanley’s by shoring up its investment banking arm, however, it has been relatively unsuccessful and yesterday’s earnings reflect that.

Despite the less than stellar earnings from Bank of America, they are at the forefront of innovation. By laying out plans to offer checking accounts without government issued identification and partnering with banks in Mexico to allow withdrawals against deposits made at the branches here, it has captured a huge marketshare among the hispanic population. Moreover, it was the first large bank to offer free online banking and less paperwork on their mortgage applications.

Recent acquisitions of LaSalle Bank, Schwab’s US Trust and China Construction Bank will help Bank of America going forward and considering management’s successful run and track record, I believe this pull back in the stock to the $48 level is a buying opportunity for patient, long-term investors. BAC has consistently increased their dividend at least for the last 10 years, increasing it by 10-15% every year. Currently, the it sits over 5%, at almost 3 times the S&P average.

Assuming a steady dividend growth rate of 10% (a conservative estimate) for the next 3 years, based on the current market risk and the stock’s low beta, applying the dividend discount model, gives it a current value of $52.

Full Disclosure: I own BAC but my position can change anytime without notice.

Last 5 posts by Faisal Laljee

• ComScore Claims to have a Larger Panel - July 15th, 2009
• Kiplinger's Top 5 Stocks for Dad - June 19th, 2009
• Malcolm Gladwell Explains Outliers - June 12th, 2009
• Top Ten Stock Tweets to Follow - June 3rd, 2009
• Game Over for GameStop - June 2nd, 2009