KBW Cuts Bank of America, Large-Cap Banks

KBW favors banks that can return capital to shareholders.
By Dan Freed ,

NEW YORK (

TheStreet

) --

Bank of America

(BAC) - Get Report

got a downgrade Thursday from Keefe, Bruyette & Woods, which also lowered its recommendation on the large-cap bank sector as a whole in a report detailing its outlook for 2011.

KBW dropped Bank of America and the entire large cap banking sector to market perform from outperform, while naming

JPMorgan Chase

(JPM) - Get Report

,

PNC Financial

(PNC) - Get Report

,

U.S. Bancorp

(USB) - Get Report

and

Wells Fargo

(WFC) - Get Report

as its top ideas.

KBW also lowered its recommendation on

BB & T

(BBT) - Get Report

and

Comerica

(CMA) - Get Report

to market perform from outperform

The report cited a "strong run" for its large cap bank index in December, arguing "it is trading near fair value in our view," adding that the valuation "coupled with the challenging prospects for revenue growth in the coming year," were behind KBW analysts' decision to lower their sector view.

In explaining the guiding rationale for its decisions on individual stocks, KBW wrote that it favors banks in a position to return capital to shareholders through dividend increases and stock buybacks. It also prefers banks with diversified revenue sources that can "shield them from the pressures of a flat yield curve," which are trading at a discount versus peers based on near term earnings forecasts, and which can earn more than their cost of equity.

--

Written by Dan Freed in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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