Bank of America: Buy Rating Reaffirmed on Attractive Valuation, Earnings Power, and Efficiency Gains Despite Trimmed Long-Term Estimates

Betsy Graseck, an analyst from Morgan Stanley, maintained the Buy rating on Bank of America. The associated price target was lowered to $64.00.

Betsy Graseck has given his Buy rating due to a combination of factors tied to Bank of America’s earnings power and efficiency outlook. She acknowledges that earnings estimates for 2026 and 2027 have been trimmed, mainly because of a higher tax rate, increased costs, and a larger share count, but notes these pressures are partially cushioned by stronger fee income and net interest income. Even after these revisions, her forecast for 2027 earnings per share remains above the market consensus, supported by a more favorable expense profile than peers expect. She also highlights that the company’s return on tangible common equity is projected to rise into the mid- to high‑teens, aligning with management’s medium‑term profitability goals.
Betsy Graseck’s rating is based on the view that Bank of America can still deliver solid operating leverage and margin improvement despite a slower trajectory than previously anticipated. Her target price, while reduced from $68 to $64, is grounded in an unchanged valuation multiple applied to the updated earnings outlook, signaling continued confidence in the long‑term story. The recent accounting change for tax‑advantaged investments, which boosts fee revenue, is incorporated into her model and supports the thesis of improving earnings quality over time. Overall, she sees the stock’s current valuation as attractive relative to its earnings potential and efficiency gains, justifying the Buy recommendation.