Sep. 8 at 8:44 PM
Jefferies named Bank of America its top franchise pick, citing a compelling long-term outlook despite expected weakness in investment-banking fees in Q3 2026. Dealogic data indicate a 40% YoY decline in fees, although Jefferies expects a more moderate 21% drop, supported by a stronger September and viewing the weakness as deal-timing related rather than a deterioration in the franchise.
A key catalyst is the gradual repricing of Bank of America’s fixed-rate assets, with 90% of maturities still due between 2027 and 2031. Jefferies expects this to support 5%-7% annual net interest income growth over the medium term and lift net interest margin to 2.30%-2.40%, from 2.08% in Q2.
Jefferies lowered EPS estimates to
$4.65 for 2026 and
$5.30 for 2027, while introducing a 2028 estimate of
$5.90. The firm expects stronger earnings, improving returns on tangible common equity and better franchise quality to justify a higher valuation multiple, forecasting 17.4% ROTE in 2027.
$BAC