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Bank of America (NYSE:BAC) got upgraded to Equal Weight from Underweight given its higher quality loan portfolio and above average sensitivity to higher interest rates, Morgan Stanley analyst Betsy Graseck wrote in a note to clients Monday.
Shares of BAC are edging up 0.5% in premarket trading.
The analyst cited BofA's lower loan-to-deposit ratio, along with a high percentage of non-interest bearing consumer deposits. This implies that the lender should have a lower deposit beta (a measure of how responsive management's deposit repricing is to the change in market rates) as yields move higher.
In the wake of the Fed's fresh tightening cycle, "we expect 6 rate hikes in 2022 and 4 in 2023 will drive a Net Interest Income CAGR of 16% over the next 2 years," Graseck highlighted.
The Bank of New York Mellon (NYSE:BK) also got upped to Equal Weight from Underweight, as it's "one of the biggest beneficiaries of a faster rate hike cycle as it will be able to more quickly recoup $1B+ of annual money market fee waivers," Graseck noted. BK stock gains 1.3% in premarket trading.
Meanwhile, Seeking Alpha's Quant Rating screens BK with a Buy rating, with the best factor grades in Growth and Profitability. Wall Street Analysts also view BK as a Buy (7 Strong Buy, 4 Buy, 6 Hold, 1 Strong Sell).
Some notable downgrades: Citigroup (NYSE:C) cut to Underweight from Equal Weight due to a lack of near-term catalysts and the negative impact of de-globalization. Fifth Third (FITB) downgraded to Equal Weight from Overweight. M&T Bank (NYSE:MTB) lowered to Underweight from Equal Weight on the basis of below-peer loan growth and elevated credit risk.
Earlier in March, the biggest Wall Street banks see revenue falling $4.6B.