After the Big Four banks — Bank of America (NYSE:BAC), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (NYSE:WFC) — posted Q4 earnings on Friday, Piper Sandler analyst R. Scott Siefers downgraded Wells Fargo to Neutral and Bank of America to Underweight on Tuesday.
“The massive rising stress level is internet curiosity revenue degradation,” the analyst wrote in a to purchasers. “It appears seemingly the 4Q represented a high-water mark right here, and a harder outlook (particularly due to deposit combine/migration) weighs on our expectations — the start line for 2024 might be particularly powerful.”
On the constructive aspect, credit score is normalizing with no obvious points on the horizon, and share repurchases are coming again faster than anticipated, he mentioned.
On the Wells Fargo (WFC) downgrade, “we really feel we received all the things we wished from the price outlook,” nevertheless, “the NII outlook seems rougher than we had hoped, which overwhelms a greater price base,” Siefers mentioned. Seeing that the great price information is already digested, he sees much less upside potential.
For Bank of America (BAC), whereas it is an “wonderful firm,” Siefers mentioned, “we concern there might be additional stress on the NII outlook given developments at its closest friends.” Cost management will must be excellent to fulfill his up to date expectation, he added. “Given our issues concerning the cloudier outlook relative to friends, mixed with its sturdy valuation, we see higher alternative elsewhere at current and suspect the shares might have hassle gaining traction till the image crystallizes extra.”
Siefers reiterated JPMorgan Chase (JPM) at Overweight and mentioned it gave essentially the most defensible outlook. “Moreover, sturdy capital and reserves place it properly for no matter macro weak spot might come,” he mentioned.
While Siefers rated Bank of America (BAC) Underweight, Wells Fargo (WFC) Neutral, and JPMorgan (JPM) Overweight, the SA Quant system charges all three shares as Hold.
SA contributor Librarian Capital mentioned whereas Bank of America’s Q4 earnings had been worse than JPMorgan’s (JPM), however its inventory is cheaper.