J.P. Morgan Sees More Upside in These Two Bank Stocks

  • J.P. Morgan increased its target price on several bank stocks including Citigroup, Bank of America, and Wells Fargo.
  • J.P. Morgan raised the target price on Citigroup by 9%. Meanwhile, Bank of America’s target price increased by 12%.
  • Wells Fargo’s increased target price is 3% below its closing price on Monday.

On Monday, J.P. Morgan raised its target price on Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC) stock. J.P. Morgan raised the target price on Citigroup stock by 9% to $84.50. The increased target price implies an upside of 12% in Citigroup stock based on its closing price of $75.15 on November 4.

J.P. Morgan raised Bank of America’s target price to $33.50, which implies about a 12% increase from the previous target of $30. Meanwhile, the new target price suggests an upside of about 3% in Bank of America stock based on its closing price of $32.40 on Monday.

Citigroup and Bank of America shares closed 1.8% and 1.9% higher following the higher target prices.

J.P. Morgan also increased Wells Fargo’s target price by 6% to $51. However, the increased target price is about 3% below the stock’s closing price on Monday. The stock closed nearly 1% higher.

Notably, the Fed has announced three rate cuts in a row this year, which will likely hurt the net interest revenues in the near term. However, J.P. Morgan analyst Vivek Juneja expects the decline rate in the net interest revenues to moderate in 2020, according to a MarketWatch report.

What’s the upside in Citigroup and Bank of America stock?

Analysts have a consensus target price of $83.40 on Citigroup stock, which implies a potential upside of about 11%. In our previous series, we emphasized that Citigroup’s valuation gap with its peers and balance sheet expansion will continue to drive the stock.

Citigroup stock has increased 44.4% on a YTD (year-to-date) basis. The stock has outperformed its peers and the broader markets by a wide margin. Despite the surge, Citigroup stock trades at a forward PE ratio of 9.1x, which is lower than most of its peers.

We expect the rate cuts to pose challenges for Citigroup. However, loan and deposit growth, increased non-interest revenues, and improved efficiency could continue to drive the company’s revenues and EPS. Citigroup’s low valuation supports more upside.

Analysts have a consensus target price of $33.54 on Bank of America stock, which implies a potential upside of about 3%. Bank of America’s net interest revenues continued to increase amid low rate cuts due to growth in loans and deposits. In the last quarter, Bank of America’s average loans and leases increased 6%. Meanwhile, the average deposits rose 4%. We think that growth in lending and deposits will continue to support Bank of America’s top line. Meanwhile, share buybacks will likely drive healthy EPS growth.