Tuesday, Truist Securities began coverage on Bank of America stock (NYSE:BAC), assigning a Buy rating and setting a price target of $52.00. According to InvestingPro analysis, the banking giant, currently trading at $45.40 with a market cap of $348.35 billion, appears undervalued based on its proprietary Fair Value model.
The firm's analysis suggests that Bank of America is poised for growth, anticipating a 4-5% increase in net interest income (NII) and a rebound in retail deposit growth. This expected performance is seen as a turnaround from what was described as a "lost year" for positive operating leverage.
The analyst at Truist Securities highlighted that the expected growth in NII and deposit expansion would contribute to above-average earnings per share (EPS) growth and a significant rise in return on tangible common equity (ROTCE) by 2026.
The bank's strong fundamentals are reflected in its consistent dividend performance, with InvestingPro data showing 11 consecutive years of dividend raises and an attractive current yield of 2.29%. These factors are predicted to help Bank of America's shares close the valuation gap with its industry peers, such as JPMorgan Chase (NYSE:JPM) & Co. and Wells Fargo (NYSE:WFC) & Company.
According to the coverage, Bank of America's prior and current investments are expected to drive organic share gains across lines of business (LOBs). Furthermore, the firm suggests that regulatory clarity could allow the bank to return additional capital, which could serve as a catalyst for the stock's performance.
The analyst's statement provided a concise summary of their thesis, emphasizing the gradual repricing of fixed-rate assets and the resurgence of retail deposit growth as key drivers for Bank of America's future financial success. This growth trajectory is expected to produce not only higher EPS but also a significant expansion in ROTCE.
The price target of $52.00 set by Truist Securities reflects confidence in the bank's capability to execute its strategy and achieve the forecasted financial outcomes. With the initiation of coverage and a positive outlook, the market will be watching Bank of America's progress closely in the coming months. Currently trading at 16.4x earnings, the stock has analyst targets ranging from $39.50 to $58.00, with detailed valuation analysis available in the comprehensive Pro Research Report on InvestingPro.
In other recent news, Bank of America has seen significant developments. UBS analyst Erika Najarian upgraded the bank's stock from Neutral to Buy, with a new target price of $53.00, citing potential benefits from regulatory easing and strategic stock buybacks. Concurrently, CFRA and Citi also upgraded the bank's stock with similar price targets, indicating a positive outlook on the bank's financial performance.
Bank of America has been under regulatory scrutiny, receiving a cease and desist order from the Office of the Comptroller of the Currency (OCC) due to deficiencies in its anti-money laundering measures. The bank is actively addressing these issues, working closely with the OCC to enhance its systems.
Moreover, the Consumer Financial Protection Bureau (CFPB) has taken action against the bank for alleged failures to protect consumers from fraud on the Zelle payment network and for illegal practices related to credit card rewards programs. The bank is cooperating with the CFPB in relation to these allegations.
Despite these challenges, analysts' upgrades reflect a belief in Bank of America's capacity to outperform its current valuation and deliver shareholder value through strategic buybacks and capitalizing on market opportunities. These are the recent developments that have had an impact on Bank of America.
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