Bank of America Raised to Neutral at Piper on Changing Net Interest Income (NYSE:BAC)

Piper Sandler raises Bank of America’s rating (NYSE:BAC) from “Neutral” to “Underweight” based on the view that large banks’ net interest income will bottom out in the second quarter of 2024 and then grow for a sustained period.

“Given the likelihood that BAC’s NII will reach this level quarter and then begins stronger growth, we no longer see (a) compelling reason to hold the company accountable for its earnings missteps,” analyst R. Scott Siefers wrote in a note to clients.

Specifically, he expects Bank of America’s (BAC) net income to decline to about $13.9 billion in the second quarter before rising to $14.5 billion to $14.6 billion by the fourth quarter of 2024. Siefers estimates the bank’s net interest margin will stabilize at 2.30% to 2.40% over the next few years.

“Given the combination of scale benefits and the currently changing NII, we simply believe it is appropriate to assign a higher multiple to the stock than we previously assumed,” he added. Piper’s new price target of $42 (up from $37 previously) implies the stock will trade at ~12x estimated 2025 EPS, up from ~11x previously.

Piper Sandler continues to favor Citigroup (C) and JPMorgan (JPM) with Overweight ratings.

Bank of America’s (BAC) Neutral rating contrasts with SA Quant’s Strong Buy rating and the average SA Analyst and Wall Street ratings of Buy.