Bank of America cut to Neutral at Atlantic over slowing NII growth

E_Y_E

Atlantic Equities analyst John Heagerty on Tuesday downgraded Bank of America (NYSE:BAC) to Neutral from Overweight as slowing net interest income growth and noninterest income revenue headwinds heading into 2023.

Bank of America (BAC) issued 2023 "slightly disappointing" net interest income guidance of ~10%, "as banks incorporate potential Fed rate cuts in 2H23 and the lower US10Y yield," he wrote in a note to clients.

BAC stock fell 0.5% in Tuesday morning trading.

In the bigger picture, bank stocks tend to underperform leading into a recession, but Heagerty expects them to outperform "once there is a clearer understanding about the depth of the likely economic slowdown."

He reiterated his Overweight recommendations on Wells Fargo (WFC) and First Republic Bank (FRC) and Underweight on Goldman Sachs (GS).

The Neutral rating on Bank of America (BAC) aligns with the SA Quant rating of Hold and diverges from the average Wall Street rating and the SA Author's average rating, both at Buy.

During BofA's (BAC) Q4 earnings call CEO Brian Moynihan said the company's base case sees a mild recession in 2023, but it's preparing for worse.

See why SA contributor Vladimir Dimitrov says fearmongering over BofA's latest earnings is likely exaggerated