Goldman Sachs Reiterates 'CL-Buy' on Bank of America (BAC) and Cuts Citi (C) to 'Neutral'

September 16, 2016 7:03 AM EDT
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Price: $55.68 -0.77%

Rating Summary:
    18 Buy, 12 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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(Updated - September 16, 2016 8:21 AM EDT)

Goldman Sachs downgraded Citi (NYSE: C) from Buy to Neutral with a price target of $50 ($52 prior). Analyst Richard Ramsden said he favors Bank of America (NYSE: BAC). Its rating was maintained at Conviction Buy and its price target was raised to $19 (from $17).

"Our new analysis gives us increased confidence that BAC can reach 10% ROTCE by 2018 while C will likely continue to fall short of its target," said Ramsden.

The analyst added, "We believe BAC is hitting an inflection point with operating leverage being driven by a combination of low single digit revenue growth, absolute reductions in the expense base, and stable credit. We delve deeper into BAC’s revenue outlook and conclude that top line growth will reach ~4% annually through to 2018, driven by growth initiatives in the consumer bank and wealth management. Importantly, we do not see the expense initiatives impacting revenues given the bulk of the restructuring stems from lower data center costs and continued run off in the LAS portfolio."

Discussing his downgrade of Citi, Ramsden said, "Our Buy thesis had been based on increased visibility into a cleaner stream of earnings and higher capital returns. The earnings inflection has failed to materialize and ROEs are currently well below management’s 10% target at 7.7%. Despite investments in higher return businesses like credit cards, we do not see a path to a meaningful inflection without an improvement in the macro environment. Ultimately, we view this story as centered around capital returns, which we see as a dormant theme until next year’s CCAR process."

For an analyst ratings summary and ratings history on Citi click here. For more ratings news on Citi click here.

Shares of Citi closed at $47.08 yesterday.

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