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Seaport Research Partners has upgraded Bank of America’s (NYSE:BAC) rating from “Neutral” to “Buy.”
In a Diversified Financials report, senior analyst Jim Mitchell said the team is setting Bank of America’s (BAC) price target at $48, with a 12.5x multiple of 2025 EPS, up from 10.4x.
EPS growth estimates for the stock went from 0% during the second quarter of the year, to 2% for the whole 2024 year, to 7% for 2025.
Bank of America (BAC) was under-earning the most in net interest income, with its first quarter net interest margin at 1.99%, well below its peak of 2.53% during the first quarter of 2019. In addition, the company had a slow pace of held-to-maturity reinvestment, uncertainty around the timing of hedges maturing, and above average asset sensitivity, said Mitchell.
But there are a few things that changed, including improving turnover across the loan book; growth from short-term bank yield charges; deposit growth across the industry; and the higher-for-longer environment for interest rates.
The latter “buys more time for Bank of America (BAC) to re-price assets at higher rates and return to balance sheet growth (helping to counteract potential rate cuts next year),” said Mitchell.
The stock is currently up 20.27% year-to-date at $40.50.