One of Wall Street’s top investment banks could see its share prices go tumbling down in the months to come. While hard to believe, that’s exactly what one analyst has been warning investors on Thursday. Bank of America (NYSE: BAC) has seen its share price fall by over 15 percent in the month of August alone, a decline that some are now warning to be just the beginning.
According to Barrons, analyst Michael Rose from Raymond James cut his earnings estimates for almost every single bank stock he covers, with Bank of America is his biggest worry. He recently dropped his rating of BoA from the equivalent of a “buy” to a “neutral” in a note to clients on Thursday, warning that the impact of future possible Fed interest rate cuts would weigh heavily against major banking stocks.
Rose goes on to say that he cuts his estimates for the banking sector overall, now seeing that “the risk-reward as balanced” and that the sector is riskier to invest in then it’s been for a while. Bank of America, he argues, are more sensitive to rate cuts than its peers, which means the investment bank has to deal with “a greater challenge to net interest income given further flattening of the yield curve and the potential for several additional rate cuts from here.” Rose also said that the company’s chances of reporting positive operating leverage in 2020 were “waning” as he expects another cut from the Fed in December, further hurting the bank’s profitability.
Shares of Bank of America have risen by 9.8 percent so far in 2019, falling behind the 16 percent rise seen in the S&P 500. Looking a bit farther back, BoA’s stock fell significantly in Q4 2018, falling more than 25 percent as investors started to worry that a potential global recession could be on the horizon. While the bank managed to recover some of those loses, shares have begun to fall again as concerns for global growth continue to hurt the company.
On Thursday, however, shares of Bank of America didn’t move much in response to the analyst’s predictions, instead rising by 1.6 percent and ending the day at $27.30 per share. At the moment, most other analysts covering the stock are optimistic about its prospects, although there is a large portion of “neutral” ratings at present among the more cautious experts.
Bank of America Company Profile
Bank of America is one of the largest financial institutions in the United States, with more than $2.3 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking, and global markets. Bank of America’s consumer-facing lines of business include its network of branches and deposit-gathering operations, home mortgage lending, vehicle lending, credit and debit cards, and small-business services. The company’s Merrill Lynch operations provide brokerage and wealth management services, as does U.S. Trust private bank. Wholesale lines of business include investment banking, corporate and commercial real estate lending, and capital markets operations. Bank of America has operations in several countries. – Warrior Trading News
