JPMorgan, Bank of America Upgraded on Recovery Potential

Bank stocks "should catch up a bit versus the broader market,” a Deutsche analyst said, upgrading J.P. Morgan and Bank of America.
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JPMorgan Chase  (JPM) - Get Report and Bank of America  (BAC) - Get Report broke out of their extended stock slumps on Thursday, as Deutsche Bank analyst Matt O’Connor raised his rating on both banking titans to buy from hold.

JPMorgan shares recently traded at $103.35, up 1.7%. The stock has fallen 10% year to date. Bank of America recently traded at $26.10, up 1%. The stock has slid 16% this year.

The KBW Nasdaq Bank Index has dropped 28% year to date, compared with a 21% rise for the S&P 500 index.

Bank shares have suffered in recent months from minuscule interest rates and the economic woes triggered by the coronavirus pandemic.

Deutsche Bank's O’Connor says things may get better.

“At this point, a further meaningful lag seems unlikely, and there’s an argument to be made that bank stocks should catch up a bit versus the broader market,” he wrote in a commentary cited by Bloomberg.

Revenue from capital markets and mortgages is buoyant, O’Connor said. And fees from service charges, card income and brokerage activities are on the rebound.

He said he had “more confidence in a continued macro recovery,” which would help boost bank stocks. There’s a “good chance” that banks have basically completed adding to loan-loss reserves, he said

Meanwhile, Citigroup analyst Keith Horowitz wrote words of praise for Bank of America. An investor call with Chief Executive Brian Moynihan left Horowitz “more upbeat about the broader macro outlook with respect to Bank of America's business model and credit quality outlook,” Bloomberg reports.