Deutsche Bank Downgrades Bank of America (BAC) to Hold

Deutsche Bank downgraded Bank of America (NYSE: BAC) from Buy to Hold. Analyst Matt O-Connor sees the stock as fairly valued.

"While we don’t view BAC shares as pricey, we also don’t view the valuation as depressed," said O-Connor. "BAC shares now trade at 11x our 2017e, a slight premium to other market sensitive banks and about 65% relative to the S&P 500. Upside to the stock seems increasingly dependent on a pickup in economic activity, higher interest rates, and stronger capital market revenues as more company specific positives (such as good expense mgmt, de-risking of the credit book, and solid capital build) seem priced in."

"Our $17.50 target price assumes BAC shares trade at a 5% premium to our target group multiple for the Market Sensitive banks of ~11x our 2017E given continued execution on expenses, capital and credit. Our target group multiple assumes Market Sensitive banks trade at a ~20% discount to the overall bank group given more regulation, a more volatile business mix and potentially lower long-term growth prospects. Primary downside risks include continued low interest rates, weak capital markets revenues, and an unfavorable political/regulatory landscape," added the analyst.

For an analyst ratings summary and ratings history on Bank of America click here. For more ratings news on Bank of America click here.

Shares of Bank of America closed at $17.01 yesterday.

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