Bank of America Corporation (NYSE:BAC) and Wells Fargo & Co. (NYSE:WFC) could get a boost in the event of a rate hike at the FOMC meeting scheduled for September 20-21. The rising rate environment can boost the banking major’s net interest income (NII), which is the revenue derived from interest-bearing assets less interest paid to depositors. Market experts are predicting a 50 basis points (bps) rate hike in September.
In this regard, Ethan Harris, Head of Global Economics at BofA Global Research, has stated that “Nonetheless, the favorable tone of the July inflation data means the Fed is likely to raise its policy rate by 50bp in September, as opposed to opting for another large 75bp hike. BofA continues to forecast 50bp hikes in September and November, followed by a 25bp hike in December, bringing the target range for the federal funds rate to 3.50-3.75% at year-end,” as stated in an article published on Financialexpress.com.
Against this current backdrop, let’s take a look at two bank stocks that Wall Street analysts are bullish on:
Bank of America Corporation (NYSE:BAC)
Backed by robust growth in loans and rising interest rates, North Carolina-based Bank of America saw a surge in net interest income in the second quarter of 2022. The world’s second-largest bank by market capitalization ($268.62 billion) also benefitted from rising consumer spending. The company also witnessed an upside in both credit and debit card spending.
BAC predicts NII in the third quarter of 2022 to surge by a minimum of $900 million or $1 billion over the year-ago period.
Is Bank of America a Good Stock to Buy?
Turning to Wall Street, analysts look cautious but optimistic about BAC stock, which has a Moderate Buy consensus rating based on 11 Buys and five Holds. BAC’s average price target of $42.40 implies 26.8% upside potential. Shares of the company have lost about 26.4% year-to-date.
Meanwhile, financial bloggers are 87% Bullish on BAC, compared to the sector average of 68%. As per TipRanks, hedge funds, too, look bullish on the stock, as they increased their holdings in Bank of America by 1.7 million shares in the last quarter.
Wells Fargo & Co. (NYSE:WFC)
The American multinational financial services company registered a 16% year-over-year rise in its NII in the second quarter of 2022. With rising interest rates supporting the net interest income growth along with falling expenses, the California-based bank’s management is expecting to see improved performance in the quarters ahead.
Wells Fargo is making significant strides to boost its loan and deposit balances and consumer card portfolios. It projects a 20% year-over-year jump in NII in 2022, backed by rising interest rates.
Is Wells Fargo a Good Company to Invest In?
As of now, Wells Fargo stock could be a good investment option. Analysts tracked by TipRanks have a Strong Buy consensus rating on WFC stock, which has 23.4% upside potential. WFC’s average price target stands at $53.54.
Wells Fargo stock has lost 13% so far this year. However, financial bloggers on TipRanks are 78% Bullish on WFC, compared to the sector average of 68%.
Final Thoughts
Improving U.S. economic conditions can also support the top-line growth of banking players. Further, sell-offs induced by recessionary fears have resulted in bank stocks appearing to be trading at attractive discounts to their long-term historical averages. This offers some great buying opportunities for taking long-term positions despite the probability of the U.S. economy entering a recession.
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