Though BofA management has kept a handle on expense growth, the analyst said it will be difficult to have operating leverage as net interest income slows.
Bank of America shares could struggle as a key financial indicator for banks shows tightening, according to Atlantic Equities. Analyst John Heagerty downgraded the stock to neutral from overweight. He also lowered his price target by $5 to $40. The new target implies a 13.3% upside from where the stock closed Monday.
He added that the upside to net interest income for the current year is already priced into the stock. He expects pre-provision profit growth slowing from 14% in 2023 to 3% in 2024. Major banks delivered mixed results for the fourth quarter, as Heagerty noted financial stocks tend to struggle leading up to a recession but can outperform once the extent of an economic slowdown is clearer. Industry wide, he called net interest income forecasts for 2023 "slightly disappointing.
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