TLDR

Table of Contents

Bank of America (BAC) stock was upgraded to “overweight” by Morgan Stanley analyst Betsy Graseck
BAC shares rose 3.46% on Monday after falling 21.8% year-to-date through Friday
Analysts cite BAC’s valuation at 8x 2026 earnings projections as attractive
Goldman Sachs (GS) was downgraded to “equal-weight” due to investment banking revenue exposure
BAC is considered defensive with strong credit quality and less risk in a recessionary environment

Bank of America shares jumped over 3% on Monday as analysts pointed to the stock as a potential buying opportunity following a steep decline this year. The bank’s stock had tumbled nearly 22% year-to-date through Friday, making it the worst-performing money center bank in 2025 so far.

Morgan Stanley analyst Betsy Graseck upgraded Bank of America to “overweight” from “equal-weight” on Monday. She did lower her price target to $47 from $56 a share, acknowledging market concerns that Federal Reserve rate cuts and yield curve changes would affect BAC’s net interest margin expansion.

Despite the reduced target, Graseck sees value in BAC shares at their current levels. The stock is now trading at approximately eight times her 2026 earnings projections for the bank, with an expected return on equity of 11% in the coming year.

Analysts Highlight BAC’s Defensive Qualities

Bank of America also received positive commentary from Citi analyst Keith Horowitz, who noted the stock currently trades at a “substantial discount” compared to competitors JPMorgan Chase and Wells Fargo.

“In our view this selloff has created a very attractive entry point for a stock that we believe should be viewed as a defensive name here with strong credit quality and capital,” Horowitz wrote.

The upgrade comes as major banks prepare to kick off first-quarter earnings season. JPMorgan Chase, Morgan Stanley, and Wells Fargo will report results on Friday, while Bank of America is scheduled to announce its quarterly performance on April 15.

Treasury Yields May Support Performance

Monday’s stock recovery coincided with rising Treasury yields, which could benefit Bank of America’s lending earnings. The bank has a substantial portfolio of older, lower-yield bonds maturing each quarter.

When these bonds mature, reinvesting the proceeds at today’s higher yields boosts the bank’s net interest income. This steady portfolio turnover also reduces the impact on capital when older bonds lose value as yields increase.

Bank of America has an advantage in its deposit base as well. The bank maintains relatively inexpensive deposits thanks to its extensive network of consumer checking accounts.

Lower Risk Profile Attracts Investors

These deposits tend to be less sensitive to higher yields available elsewhere, unlike banks with large portions of wealth-management account deposits. This characteristic makes BAC’s funding costs more stable in a rising rate environment.

Another factor working in Bank of America’s favor is its relatively lower credit risk compared to peers during economic downturns. This assessment is supported by the bank’s performance in the Federal Reserve’s annual stress tests.

As corporate credit risk indicators reached their highest levels since 2023, according to ICE BofA index data tracked by the Federal Reserve, BAC’s more conservative approach appears increasingly valuable to investors.

The KBW Nasdaq Bank Index was up more than 1% by Monday afternoon, with Bank of America leading gains among the largest U.S. banks. The S&P 500 was flat during the same period.

Analysts at KBW recently highlighted that Bank of America shares were among the “cheapest” of the global, systemically important U.S. banks as of the end of March. They noted BAC was trading at just over 9 times expected 2026 earnings.

While Bank of America’s stock received an upgrade, Morgan Stanley’s Graseck simultaneously downgraded Goldman Sachs to “equal-weight” from “overweight.”

Her reasoning centered on Goldman’s heavy exposure to investment banking revenues, which she described as having “the fastest twitch response within the financials sector to recession risk and deteriorating market conditions.”

More than 60% of Goldman Sachs’s revenues come from its global banking and markets unit, making it potentially more vulnerable to economic uncertainty than traditional commercial banks like BAC.

Bank of America’s strong performance on Monday came after the stock had dropped dramatically during previous trading sessions, falling 17.8% over the past two sessions before Monday’s rebound.

Goldman Sachs, meanwhile, continued to struggle, with its stock falling 1.13% on Monday after sliding 16.4% over the previous two days.

Bank of America is scheduled to report its first-quarter earnings on April 15, while Goldman Sachs will announce its results a day earlier on April 14.

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