On Friday, Keefe, Bruyette & Woods shifted their position on Bank of America shares (NYSE:BAC), raising the stock from Market Perform to Outperform and increasing the price target to $46.00 from the previous target of $37.00. The upgrade is attributed to a combination of robust capital, deposits, and credit quality.
The firm anticipates a pivotal change in the bank's net interest income (NII) in the fourth quarter of 2024, forecasting a 5% increase over their second-quarter estimates. This expected rise is due to the repricing of back books and improved commercial and industrial (C&I) yields. Additionally, even with the anticipation of four interest rate cuts in 2025, a 4% growth in NII is still expected.
Bank of America's held-to-maturity (HTM) book has previously been considered a significant risk for the stock. However, the firm foresees continued cash flows to be reinvested into a higher-yielding available-for-sale (AFS) book, which should diminish the negative impact if the yield curve becomes less inverted, potentially due to a bull steepener scenario.
The firm also believes that Bank of America is on track to close the gap towards its 15% return on tangible common equity (ROTCE) target. Moreover, there is potential for consensus estimates to increase, which could lead to further outperformance of the stock in the market.
In other recent news, Bank of America's earnings and revenue have been a focal point for investors. Wells Fargo (NYSE:WFC) reaffirmed an Overweight rating on the bank's stock, citing robust consumer sector performance and strategic advantages such as digital engagement and international expansion.
Meanwhile, Piper Sandler raised the price target for the bank from $35 to $37, following an adjustment in the bank's net interest income (NII) outlook. This led to revised earnings per share (EPS) estimates for 2024 and 2025.
The bank's CEO, Brian Moynihan, anticipates a rise in investment banking fees by 10% to 15% in the second quarter, with modest growth in trading revenue. However, net interest income is expected to be slightly lower than projected.
Lastly, in recent developments, an Oklahoma judge halted a state law that had led several firms, including Bank of America, to reduce their involvement in climate change mitigation efforts through their investment portfolios. These are the latest highlights in Bank of America's ongoing operations and the broader banking sector.
InvestingPro Insights
As Bank of America (NYSE:BAC) garners positive attention from analysts, InvestingPro data and tips shed further light on the bank's financial health and market position. With a market capitalization of $307.03 billion and a P/E ratio of 13.43, the bank stands as a substantial entity in the financial sector. Notably, its adjusted P/E ratio has shown a slight decrease to 13.15 over the last twelve months as of Q1 2024, suggesting a stable valuation relative to earnings.
InvestingPro Tips highlight Bank of America's impressive track record of raising its dividend for 10 consecutive years, underscoring its commitment to returning value to shareholders. Additionally, the bank has maintained dividend payments for over half a century, a testament to its enduring financial strength and operational resilience.
Despite a slight decline in revenue growth of -1.25% over the last twelve months as of Q1 2024, Bank of America remains a prominent player in the Banks industry. This is further supported by the fact that analysts predict the company will be profitable this year, with profitability already demonstrated over the last twelve months.
For those interested in diving deeper into Bank of America's financials and future prospects, InvestingPro offers a range of additional tips. Currently, there are 6 more InvestingPro Tips available for Bank of America, which can be accessed by visiting https://www.investing.com/pro/BAC. Readers looking to gain comprehensive insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching their investment research and decision-making process.
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