BofA downgraded amid capital return worries; USB and Wells upgraded

Noting Bank of America's (BAC -0.9%) capital ratio in the Fed stress test was the lowest of any bank which passed, Atlantic Equities pulls its Overweight rating on the stock, and cuts the price target to $18.50 from $20. The stress test, says analyst Richard Staite, shows BofA with a $13B buffer over the minimum requirement, meaning maybe just $5B in buybacks and $2.5B dividends this year, "although we are somewhat nervous that it or another bank could be failed on a qualitative basis."

Still, Staite expects a boost in the quarterly payout to $0.06 per share from a penny.

Staite and team upgrade U.S. Bancorp (USB +0.7%) and Wells Fargo (WFC -0.4%) to Neutral from Underweight, citing the large margins by which they passed the stress test.

In other financial sector moves, Sterne Agee boosts First Interstate BancSystem (FIBK +6%) to a Buy, citing the benefits of its impending merger with Mountain West Financial. The team also lifts EverBank Financial (EVER +2.4%) to a Buy from Neutral.

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Comments (13)
  • carlomiami
    , contributor
    Comments (638) | Send Message
    Here comes the dumb downgrades just to be on the limelight.
    24 Mar 2014, 03:06 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (1401) | Send Message
    I believe I heard that these last stress tests were the absolute toughest ever and that they envisioned a financial world in which the housing market collapsed by 50% and there were multiple Lehman failures. Basically 2008 again, only worse.


    I guess passing such a test isn't good enough anymore? Maybe the next test will be that aliens land on the mall in Washington DC and force the Federal Reserve to raise interest rates 5000%. I wonder what banks will pass that test? Maybe the "analysts" will lower those banks price target too.
    24 Mar 2014, 03:09 PM Reply Like
  • SteveTheHawk
    , contributor
    Comments (2170) | Send Message
    I guess that if those aliens do appear and those rates do increase like that, I'll sell everything I have and buy long CD's.
    24 Mar 2014, 04:09 PM Reply Like
  • MichiganTrader
    , contributor
    Comments (84) | Send Message
    Still long on BAC. At least Atlantic Equities was able to get their name in an article for a downgrade on BAC.
    24 Mar 2014, 03:14 PM Reply Like
  • Hello Again 83
    , contributor
    Comments (700) | Send Message
    They past the stress test and the test was unrealistic to begin with. This is just shouting fire in a crowded movie theater. End of week will tell the real tale and earnings in April. BAC continues to beat on earnings.
    24 Mar 2014, 03:34 PM Reply Like
  • Craig Joyce
    , contributor
    Comments (87) | Send Message
    Do you think anyone real (ie, running billions) listens to analysts who are often 25 year olds who couldnt get a good Goldman Sachs gig? I do not.
    24 Mar 2014, 05:28 PM Reply Like
  • dictionshunary
    , contributor
    Comments (770) | Send Message
    Stay long buy more so you won't wake up down the road and say woulda shoulda coulda. Opportunity is there for the picking. Picking up more in two buys this week.
    24 Mar 2014, 08:38 PM Reply Like
  • Hello Again 83
    , contributor
    Comments (700) | Send Message
    Bank of America is still an extraordinary bargain, and I wouldn't really be surprised if the banking giant manages to command multiples of two times book value down the road when the economy runs on full steam with higher interest rates, lower unemployment and a healthy housing market. In the meantime, Bank of America can grow earnings and book value and increase its valuation base. If the US financial sector rebounds strongly with a booming housing market and a buoyant mergers and acquisitions business, I think Bank of America could trade at $40 per share -- especially when the mainstream loves financial stocks again.
    24 Mar 2014, 08:51 PM Reply Like
  • jclyak
    , contributor
    Comments (215) | Send Message
    It's interesting that jpm with a whopping 6.3% after the stress test (.3% better than BAC) is doing great and BAC is initially getting a bit banged. Think about it. What would it take to bet BAC to JPM's post stress ratio? A quarter? Maybe 60 days at it's current run rate, including cash generated from depreciation, amortization and realization of deferred tax assets...something like $6.5 bil./quarter of capital at the 12/2013 run rate.


    Seems like somebody smart at the Fed will figure this out and work with BAC on the capital plan, maybe a 1q delay? By 6/30 q end, BAC will have another .6% capital cushion and all sorts of money the three following Qs to pay dividends and buy back $18 bil. worth?
    24 Mar 2014, 11:14 PM Reply Like
  • User 12110691
    , contributor
    Comments (2) | Send Message
    These analyst missed the boat of Bank of America. Therefore they need to catch. They are most cronies of Wall Street and mr Obama does not care. They are playing with real hardworking people money.
    25 Mar 2014, 01:35 AM Reply Like
  • Jack Balestrieri
    , contributor
    Comments (3) | Send Message
    Atlantic Equities. They will be sorry if they're shorting BAC. These stress test were based on an unrealistic contraction of the overall economy. All capital in excess of the stress test measurement should be available for distribution to shareholders, either thru a dividend or share repurchases. Stay long. So goes the economy, so goes BAC.
    25 Mar 2014, 02:11 AM Reply Like
  • Phr3d
    , contributor
    Comments (469) | Send Message
    Headline-grabbing horse-hockey, the stress test is dead, like Any test where the requirements can be known in advance. Good for BAC at whispering by, more capital doing what the economy Needs it to be doing, earning profits.
    And Not shame on WFC for having gobs over, since they can't get their excess out their producing because the fin sector is still recovering - making windfall profits in fin is pointless unless you can put it to work, rather than impressing a bureaucrat by passing his new whiz-bang craptastest.


    Dear D.C., please go home, stop scrounging for headlines, stop beating 'the other' party as though we don't already know that there is only one party, and
    for the love of all that is economically holy,
    Stop Helping us..
    the working (not poor, not rich, not any media-driven nomenclature)
    25 Mar 2014, 08:33 AM Reply Like
  • jclyak
    , contributor
    Comments (215) | Send Message
    Yup...I love yer stuff!
    25 Mar 2014, 09:46 AM Reply Like
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