Shares of the largest U.S. banks have been performing well so far this year, but David Konrad of Keefe, Bruyette and Woods believes the party is over for Bank of America Corp.

Konrad downgraded Bank of America
BAC,
-0.58%
to “underperform,” which is the equivalent of a sell rating, from KBW’s previous neutral “market perform” rating. He lowered his price target for the stock to $33 from $35. The new target is 10% below the stock’s closing price of $36.50 on Feb. 8.

Among 28 analysts polled by FactSet, only two, including Konrad and R. Scott Siefers at Piper Sandler, had negative ratings for Bank of America, while 11 analysts had neutral ratings on the stock and 15 rated the stock a buy.

In a note to clients, Konrad wrote that KBW’s earnings estimate for Bank of America for 2024 was “12% below consensus,” while adding that the stock was trading high relative to its historical price-to-earnings valuation levels. He also cited this year’s share price performance at a time when the consensus estimate for the bank’s 2024 pre-provision net revenue was declining.

The “provision” refers to how much money a bank sets aside to add to loan loss reserves. These transfers rise during periods of economic weakness and lower banks’ profits. Conversely, banks tend to release loan loss reserves as the economy improves, which boosts profits.

Pre-provision net revenue (PPNR) is a non-GAAP measure of a bank’s operating earnings before provisions for loan loss reserves — it is useful for a comparison of results irrespective of credit quality.

Konrad believes Bank of America’s valuation is “rich” as the stock trades at “a 5%
premium to JPM on PPNR despite lower expected returns,” and because it trades at “a 16% premium to super-regional banks on P/E compared to a historical 6% discount.”

KBW estimates Bank of America will earn $3.55 a share this year and $3.35 a share in 2024. The consensus among analysts is for the bank to earn $3.48 in 2023 and $3.76 in 2024. This data was pulled early on Feb. 9 and shows KBW is now 11% below consensus with its 2024 estimate.

Konrad wrote: “Although we view BAC as a relatively safe stock, the current premium valuation is expensive for an environment that may face more revenue risk than a severe credit downturn.”

Here is a summary of analysts’ ratings for the 20 largest U.S. bank holding companies by market capitalization:

Company	Ticker	Market cap. ($bil)	Share “buy” ratings	Share neutral ratings	Share “sell” ratings	Feb. 8 price	Cons. price target	Implied 12-month upside potential
JPMorgan Chase & Co.	JPM, +0.02%	$419	59%	41%	0%	$142.64	$157.26	10%
Bank of America Corp.	BAC, -0.58%	$293	54%	39%	7%	$36.50	$40.72	12%
Wells Fargo & Co.	WFC, +0.37%	$184	79%	21%	0%	$48.25	$53.37	11%
Morgan Stanley	MS, +0.63%	$167	55%	41%	4%	$98.96	$101.21	2%
Charles Schwab Corp.	SCHW, -0.87%	$146	61%	35%	4%	$80.61	$92.47	15%
American Express Co.	AXP, +0.95%	$134	48%	42%	10%	$179.00	$183.41	2%
Goldman Sachs Group Inc.	GS, +0.96%	$127	56%	40%	4%	$375.10	$397.90	6%
Citigroup Inc.	C, +0.37%	$99	37%	59%	4%	$51.15	$57.76	13%
U.S. Bancorp	USB, +0.51%	$75	44%	52%	4%	$49.07	$54.88	12%
Truist Financial Corp.	TFC, +0.38%	$65	38%	54%	8%	$49.26	$52.29	6%
PNC Financial Services Group Inc.	PNC, +0.31%	$65	38%	54%	8%	$161.56	$174.43	8%
Capital One Financial Corp.	COF, +0.94%	$45	44%	44%	12%	$117.22	$116.02	-1%
Bank of New York Mellon Corp.	BK, +0.79%	$42	58%	37%	5%	$51.78	$56.35	9%
Ameriprise Financial Inc.	AMP, +1.40%	$38	67%	26%	7%	$352.70	$381.27	8%
State Street Corp.	STT, +0.80%	$33	40%	60%	0%	$93.59	$94.41	1%
Discover Financial Services	DFS, +1.15%	$32	44%	52%	4%	$115.60	$116.56	1%
M&T Bank Corp.	MTB, +0.86%	$27	50%	46%	4%	$158.89	$176.45	11%
Fifth Third Bancorp	FITB, +0.37%	$26	63%	37%	0%	$37.68	$39.93	6%
First Republic Bank	FRC, +0.09%	$26	58%	29%	13%	$140.87	$142.87	1%
Raymond James Financial Inc.	RJF, +0.26%	$24	54%	46%	0%	$113.36	$128.50	13%
Source: FactSet