Citi Upgrades Bank Of America To ‘Buy,’ Raises Price Target To $54: Says Valuation Spread Between BAC And JPM Outsized

Citi has upgraded Bank of America ($BAC) to ‘Buy’ from ‘Neutral’ and has raised its price target on the stock to $54 from $46. Following the upgrade, Bank of America shares were trading higher by over 1% in Friday’s pre-market session.

Analyst Keith Horowitz reportedly wrote in a note to clients that the valuation spread between Bank of America and JPMorgan Chase & Co ($JPM) remains very outsized adjusted for returns.

“…assuming JPM is setting the table for where implied CoE for the group can go, we see very attractive risk/reward in BAC,” he said.

Notably, banks had been reporting higher profits as interest rates remained high over the last few years. Of late, with the commencement of the policy easing cycle, the prospects of making such huge profits had diminished.

However, following Donald Trump’s victory in the U.S. Presidential elections, bank stocks had rallied as investors believed lighter regulation will be a positive for the sector.

Moreover, lenders have been asking for less stringent regulation with lower capital requirements. Earlier this year, Wall Street lenders won a small victory when the extra capital requirement was brought down by regulators in September.

“On regulation, BAC is a low-risk firm and could benefit from a lighter regulatory environment, and we expect room to run with a proposal re-write on B3 potentially driving returns above our 15% normalized assumption,” the analyst stated.

Although retail sentiment on BAC was trending in the ‘bearish’ territory as of Thursday’s closing bell, Stocktwits users have taken note of the Citi upgrade.

Bank of America shares have gained over 32% since the beginning of the year.

Also See: Unity Software Stock Slides Pre-market After Mixed Earnings: But Retail Confident After Revised Guidance, New CFO Hire

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