Analyst Upgrades JPMorgan, Downgrades US Bancorp As Bank Stocks Soar

Bank stocks have gotten a lot of love on Wall Street in the past couple of months, but some banks are better-positioned heading into 2021 than others. On Thursday, Bank of America issued one big upgrade for JPMorgan Chase & Co. JPM and one downgrade, U.S. Bancorp USB.

The Analyst: Bank of America analyst Erika Najarian upgraded JPMorgan from Neutral to Buy and raised her price target from $131 to $160. Najarian also downgraded U.S. Bancorp from Neutral to Underperform and raised her price target from $44 to $52.

Related Link: Barclays Is Bullish On Bank Stocks, Upgrades Goldman Sachs, Morgan Stanley

The Thesis: In the JPMorgan note, Najarian said the bank is the “best-in-class in a likely strong ‘21 for banks.”

While she expects Market revenues to normalize in 2021, Najarian said JPMorgan will continue to benefit from several tailwinds, including credit leverage, the bottoming of quarterly spread revenues, a rebound in the U.S. consumer and a resumption of share buybacks. Even with the stock trading at a premium 2.1x tangible book value, Najarian said there is plenty of upside remaining for JPMorgan shares.

“We believe JPM is uniquely better-positioned to benefit from these themes vs. big banks we cover: a stimulus-aided comeback of the U.S. consumer, the potential return of travel and restaurant spending, and the steepening of the curve,” Najarian said.

But while she is bullish on bank stocks this year, not all of them are positioned to shine. Najarian said U.S. Bancorp is overly exposed to mortgage revenues, which she projects will normalize in 2021 after a boom in housing demand in 2020.

Bank of America is projecting U.S. Bancorp’s mortgage revenues will drop from $2.1 billion in 2020 to $1.4 billion in 2021 and $1.1 billion in 2022, creating downside risk to U.S. Bancorp’s earnings.

Benzinga’s Take: Banks will continue to deal with zero interest rates weighing on net interest margins in 2021 and beyond. Yet bank balance sheets will be far more healthy in 2021 than they were back in 2010 during the recovery from the last economic crisis.