Bank of America upgraded to Buy at Citi as convergence play
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Citi upgraded Bank of America (NYSE:BAC) to Buy from Neutral as analyst Keith Horowitz expects the wide valuation spread between the Charlotte, North Carolina-based bank and JPMorgan Chase (JPM) to narrow.
Citi analysts expect the best way to play the bank sector is convergence
“The valuation spread between BAC and JPM remains very outsized adjusted for returns (10.2% implied COE [cost of equity] vs 8.7% for JPM), and assuming JPM is setting the table for where implied CoE for the group can go, we see very attractive risk/reward in BAC,” Horowitz wrote in a note to clients.
Bank of America (NYSE:BAC) stock rose 1.0% in Friday premarket trading.
Citi sees tailwinds from swap maturities and fixed-rate asset boosting Bank of America’s (BAC) net interest margin expansion of ~20 basis points to 2.14% in 2026 with potential upward revisions to ’26.
“On regulation, BAC is a low-risk firm and could benefit from lighter regulatory environment, and we expect room to run with a proposal re-write on B3 [Basel III] potentially driving returns above our 15% normalized assumption,” Horowitz noted.
Citi lifts price target on BAC to $54 from $46.
Horowitz’s Buy rating on Bank of America (BAC) contrasts with the SA Quant rating and the average SA Analyst rating, both at Hold, and aligns with the average Wall Street rating of Buy.