Bank of America Stock vs. JPMorgan Chase Stock: Wall Street Sees Limited Upside in One But Rates the Other a Strong Buy
Incoming President Donald Trump could not be more bullish for bank stocks, which have trailed the broader market for years. Trump could roll back banking regulation, or simply pay less attention to the banks — a change from the scrutiny they’ve received from the Biden Administration. Bank mergers and acquisitions will likely get approved faster, and a Trump presidency and lower interest rates could usher in more deal-making and initial public offering activity, boosting investment banking revenues.
The two largest banks in the U.S., JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC), have already seen their stocks surge roughly 8% and 10%, respectively, since election day. It may not seem like much compared to some of the artificial intelligence high-flyers in today’s market, but it’s a big move for highly liquid, blue chip stocks with modest volatility. After the big move, Wall Street sees limited upside for one of these stocks, but rates the other as a strong buy.
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With roughly $4.2 trillion in assets, JPMorgan Chase is the largest bank in the U.S. The stock has flown roughly 40% this year, which again is a huge move for a stock with a beta roughly in line with the broader market.
Although several banks failed in 2023 due to poor balance sheet management amid the high-interest-rate environment, JPMorgan Chase has benefited. Corporate treasurers and CFOs who didn’t want to have their business at a bank that could fail flocked to large banks like JPMorgan that are too big to fail. Furthermore, the banking crisis enabled JPMorgan to acquire First Republic in an FDIC-assisted deal.
While First Republic would have likely failed had it not been acquired, JPMorgan Chase got a bank with a strong high-net-worth client base. JPMorgan Chase would not have been allowed to do the deal under normal circumstances, because it already has more than 10% of U.S. deposit market share and therefore cannot purchase any more U.S. banks by law. The deal also came with loss-sharing agreements with the FDIC.
Lower interest rates, a friendlier administration, and a steepening of the yield curve should benefit JPMorgan Chase. However, analysts believe the market has already factored these tailwinds into the stock price. Over the last three months, 19 analysts have issued reports on JPMorgan Chase, with 13 rating the stock a buy, five saying to hold the stock, and one saying to sell. The average consensus price target of roughly $234 implies roughly 3% downside.
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