Piper Sandler Downgrades Bank of America: What Investors Need To Know

Bank of America Corp BAC is facing some uncertainty for its future financial performance, leading analysts at Piper Sandler to downgrade the stock.

The Bank of America Analyst: Piper Sander Managing Director Scott Siefers downgraded Bank of America to Underweight from Neutral and lowered the price target from $36 to $33.

Piper Sandler lowered its 2023 EPS estimate from $3.50 to $3.40; the 2024 EPS estimate was lowered from $3.45 to $3.26.

“The big emerging pressure point is NII degradation,” Siefers said in a Tuesday note to investors. “It seems likely the 4Q represented a high-water mark here, and a tougher outlook (esp. thanks to deposit mix/migration) weighs on our expectations — the starting point for 2024 could be especially tough.”

The bank posted mixed results in the fourth quarter with better-than-expected non-interest income and net interest margin (NIM), but loan growth, expenses and credit costs all missed expectations.

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Looking forward, Siefers noted the bank's non-interest income was likely to come under pressure in the first quarter due to softer markets and fewer days in the quarter, which may lead to a slowdown in loan growth.

Management was reluctant to provide specific guidance for the full year but hoped to maintain the first quarter level for the rest of the year.

Siefers said this represented a reduction from the previous estimate and from management's previous aspirations to continue growing past the fourth quarter run-rate.

Expenses were also expected to rise by about 3% in the first quarter to $16 billion but then decline through the rest of the year to reach an estimated $62.5 billion for the full year.

Final Word: On a positive note, Siefers noted the bank is back in the market for share repurchases, along with competitors JPMorgan Chase & Co JPM and Wells Fargo & Co WFC.

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