NEW YORK (AP) — Shares of Bank of America outpaced other financial stocks Monday, climbing 4 percent after an analyst raised the bank's rating, sayings its earnings-per-share growth over the next two years will likely be better than the other large banks, as declining operating expenses offset slow revenue growth.
THE SPARK: Christopher Mutascio of Stifel Nicolaus upgraded Bank of America to "Buy" from "Hold." The analyst also initiated an $11 price target.
THE ANALYSIS: "We believe that without the declining expense base lever that Bank of America possesses, many banks are likely to post stagnant/modest earnings per share growth over the next two years as net interest margin pressures continue," Mutascio wrote. Another issue facing the sector is that increased regulation regarding maintaining balances to cover potential losses will require banks to set aside more money to cover the potential for souring loans.
The analyst said Bank of America has also rebuilt capital ratios quicker than expected, which means it is likely to receive approval to raise its dividend, which could perk up investor sentiment on the stock.
SHARE ACTION: Bank of America Corp.'s stock added 37 cents to $9.49 in midday trading. The shares have traded in a 52-week range of $4.92 to $10.10. The stock started the day up more than 60 percent since the beginning of the year.
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- Stifel Nicolaus