Bank Of America Opens Higher On Deutsche Bank Upgrade

Bank of America Corp.

opened sharply higher Tuesday after getting upgraded to Buy at Deutsche Bank. Early in the session, shares were up 2.15 percent to $15.94. Key to the upgrade is an improved outlook for fixed income trading, Deutsche Bank's Matt O'Connor said in a note. Expectations for the segment "likely bottomed in May," and for the second half of 2014, year-over-year comparisons will ease. Fixed income has been burdened by the so-called taper of the Federal Reserve's fiscal policy. O'Connor also sees an increase in mergers, generating ancillary revenue for Bank of America through advisory fees. The bank is well-positioned to benefit from potential increases in capital market revenue, higher interest rates and an improving economy, according to O'Connor, who also raised his target to $18, from $16.50. Moreover, a Republican sweep in November may prove a catalyst for bank stocks in general, O'Connor said. Bank of America has faced tough sledding recently, with weak results, a $12 billion legal settlement with prosecutors over mortgage issues and a $4 billion accounting error. Shares are down 10 percent this year but O'Connor said the issues "are well-known at this point." Nonetheless, banks in general face increased scrutiny by regulators concerned with money laundering "which remains a meaningful risk for all banks going forward," O'Connor said.