Bank of America downgraded after hot stock run, while U.S. Bancorp and PNC get boost

By STeve Gelsi

HSBC cuts BAC to hold from buy and upgrades USB to buy in ratings shuffle

Bank of America Corp.'s double-digit percentage stock runup in the last six months has prompted a ratings cut to hold from buy at HSBC, analyst Saul Martinez said Thursday in a research note.

"While there is a lot to like about Bank of America, its shares have risen 37% in the past six months, leaving limited implied upside to our target price," Martinez said.

HSBC lifted Bank of America's (BAC) stock price to $39 from $38.

Among the U.S. megabanks, Citigroup Inc. (C) remains the top choice for HSBC, Martinez noted.

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"We continue to expect the banks we cover to show improved net interest income the second half of 2024, generate operating leverage in 2025, and increase share buybacks in 2025 and beyond," Martinez said.

HSBC also upgraded U.S. Bancorp (USB) to buy from hold as its "preferred choice" among super-regional bank stocks.

Stock prices in the sector have been under pressure in some trading sessions since New York Community Bancorp Inc. (NYCB) disclosed an unexpected loss on Feb. 29 and sparked jitters about other big regional banks.

Lagging stock prices in the sector now offer a buying opportunity for U.S. Bancorp, Martinez said.

"We see U.S. Bancorp expanding profitability in 2025 and continuing to generate near best-in-class ROTCEs [return on average tangible common equity]," he said.

HSBC hiked U.S. Bancorp's price target to $53 from $47 a share.

HSBC also upgraded PNC Financial Services Group Inc. (PNC) to hold from reduce and hiked its price target to $155 a share from $141 a share.

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-STeve Gelsi

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03-28-24 1238ET

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