Bank of America stock rating cut to neutral by Baird on balanced risk/reward

Published 27/06/2025, 08:58
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Investing.com - Baird downgraded Bank of America (NYSE:BAC) from Outperform to Neutral on Friday, setting a price target of $52.00 as the firm sees a balanced risk/reward profile following recent stock appreciation. The banking giant, currently valued at $357.84 billion, is trading near its 52-week high of $48.08, with InvestingPro data indicating overbought conditions.

The downgrade comes after Baird had upgraded Bank of America in April, when the firm believed the market was "under-appreciating its earnings power and overly focused on BRK’s selling of the stock during the tariff panic."

Baird noted that following the recent stock movement, Bank of America’s capital-to-assets ratio is now close to approximately 11%, and the market is discounting a 1% return on assets, which exceeds the 2025 and 2026 consensus estimates.

The research firm maintained that it remains "huge fans of the BAC franchise" and acknowledged that the bank should continue to benefit from "the tailwind of an improving NIM along with a more favorable capital markets backdrop."

Despite these positive factors, Baird believes the stock is "largely reflecting it here," with shares trading at close to 10 times normalized earnings per share power, prompting the firm to "step aside" from its previous bullish stance.

In other recent news, Bank of America has maintained its net interest income guidance for 2025, projecting a fourth-quarter exit rate of $15.5-15.7 billion, as confirmed by CEO Brian Moynihan during a recent industry conference. Truist Securities reiterated its buy rating and set a price target of $51.00 for the bank, aligning with consensus expectations. Citi also raised its price target for Bank of America to $54.00, maintaining a Buy rating, and noted that the bank’s second-quarter net interest income result is expected to be strong, despite some challenges. Additionally, Bank of America’s second-quarter investment banking fees are projected at approximately $1.2 billion, which falls short of the consensus estimate of $1.5 billion.

Fitch Ratings confirmed Bank of America’s ’AA-’ rating with a stable outlook, highlighting the bank’s strong intrinsic profile and disciplined risk management. The bank’s operating profit/risk-weighted assets ratio improved to 1.9% in the first quarter of 2025, supported by lower funding costs and higher global market activity. In other developments, Bank of America, alongside UBS, has been selected by ABB Ltd (SIX:ABBN). to assist in a potential deal involving its robotics unit, which may involve a spinoff or sale. These recent developments reflect Bank of America’s ongoing strategic initiatives and market positioning.

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