Bank of America stock rating downgraded to Hold by HSBC despite price target hike

Investing.com - HSBC downgraded Bank of America (NYSE:BAC) from Buy to Hold on Tuesday, while simultaneously raising its price target to $51.00 from $47.00. The stock currently trades at $48.66, near its 52-week high of $49.30, with a P/E ratio of 14.31x and a dividend yield of 2.14%. According to InvestingPro analysis, the stock appears fairly valued based on its comprehensive Fair Value model.

The financial services firm cited a balanced risk-to-reward profile for the banking giant, noting that its new price target offers approximately 4% upside potential. This comes as Bank of America has delivered strong returns, with a 22.73% gain over the past year and maintains an impressive 11-year streak of consecutive dividend increases.

HSBC highlighted that Bank of America has underperformed its peers year-to-date, and is the only universal bank under its coverage whose consensus 2026 earnings per share estimate is lower today than on December 31, 2025.

The firm’s own 2026 EPS estimate for Bank of America sits approximately 4% below the Visible Alpha consensus, further supporting its more cautious stance on the stock.

Despite this underperformance, HSBC observed that Bank of America has experienced PE multiple expansion comparable to Morgan Stanley (NYSE:MS) and only moderately less than Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), while exceeding the multiple expansion seen in super-regional banks under its coverage.

In other recent news, Bank of America has been the focus of several significant developments. Baird downgraded Bank of America from Outperform to Neutral, citing a balanced risk/reward profile following recent stock appreciation. Despite acknowledging positive factors such as an improving net interest margin, Baird believes the stock’s current valuation reflects these benefits. Meanwhile, Citi raised its price target for Bank of America to $54, maintaining a Buy rating. Citi noted that expectations for Bank of America are "reasonably set" ahead of its second-quarter earnings report, anticipating strong net interest income results relative to guidance.

In a broader financial context, the Federal Reserve’s annual stress test indicated that major banks, including Bank of America, are well-capitalized to withstand severe economic conditions. This test modeled a hypothetical global recession scenario, which banks absorbed with projected losses exceeding $550 billion. Additionally, Lazard (NYSE:LAZ) has hired Bill Hart from Bank of America to lead its West Coast financial sponsors division. Hart’s move is part of Lazard’s strategy to expand its involvement with buyout firms and alternative asset managers. These developments highlight the dynamic environment surrounding Bank of America and the broader banking sector.

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