Alastair Borthwick, Bank of America’s (NYSE:BAC) CFO, expects the investment banking (IB) fees to remain subdued for the entire banking sector in Q3. However, on a positive note, Borthwick anticipates Bank of America to fare better than the broader industry and report a lower decline.
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At the Barclays Global Financial Services Conference held on Monday, Borthwick said that the investment banking fee pool is “down probably 30% — 35% right now.” Nonetheless, Borthwick expects BAC to perform “slightly better than that.”
The pressure on IB fees comes despite easier year-over-year comparisons. Notably, the investment banking fees for the large U.S. banks declined in the prior-year period due to the challenging macroeconomic scenario. Per Borthwick, Bank of America could deliver IB fees of about $1 billion in the third quarter of 2023 compared to $1.2 billion in the prior-year quarter. BAC’s IB fees fell by 46% in Q3 2022, reflecting weaker industry-wide underwriting activity.
Along with lower IB fees, concerns over loan growth pose challenges. Citing a lower-than-expected loan and capital market growth, Wells Fargo analyst Mike Mayo lowered the price target on BAC stock to $40 from $43 on August 23. Further, the analyst expects Bank of America to repurchase fewer shares due to regulatory changes. However, he maintained a Buy rating on BAC stock. While Mayo is bullish about Bank of America, let’s check what the consensus rating indicates about the stock.
Is Bank of America Stock a Buy Right Now?
With eight Buy, six Hold, and two Sell recommendations, Bank of America stock sports a Moderate Buy consensus rating on TipRanks. Aside from lower IB fees and loan growth, higher deposit costs could also pose challenges for the firm. However, Borthwick reiterated the full-year NII (net interest income) outlook (expected to be over $57 billion), which is positive.
Analysts are cautiously optimistic about BAC stock. At the same time, their average price target of $35.16 implies a decent upside potential of 23.46% from current levels.
