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Wolfe Research upgraded Bank of America (NYSE:BAC) to Outperform from Peer Perform as banks that have been "under-earning" their peers in the rising rate environment approach an inflection point.
Analyst Steven Chubak has stayed on the sidelines on concerns about valuation and rate upside, which appeared to be fully baked in when he downgraded BofA in October 2021.
Constraints on net interest income include Bank of America's (BAC) high concentration of fixed securities, negative deposit remixing, and tepid loan growth compared with its peers, he explained.
"While some of these NII pressures should persist in a higher-for-longer rate backdrop, with BAC’s 1Q24 results reflecting better asset repricing trends (both securities and loan yields), we believe that we’re now approaching the point of NII inflection where 'under-earning' banks including both BAC and SCHW [Charles Schwab] should post stronger gains following multiple years of underperformance," Chubak wrote in a note to clients.
Bank of America (BAC) stock rose 0.8% in Friday premarket trading.
The Outperform rating contrasts with the SA Quant rating of Hold, and aligns with the average SA Analyst rating and average Wall Street rating, both at Buy.