Citigroup Inc C and Bank of America Corp BAC are still battered stocks from the 2008 financial crisis – particularly when compared with peers JPMorgan Chase & Co. JPM and Wells Fargo & Co WFC. However, when looking at the large cap banks, Morgan Stanley picked Bank of America and Citigroup as its “Top Investment Ideas.” But Morgan Stanley was not just bullish on large-cap banks, identifying BankUnited BKU as a top pick in the midcap space.
As for specifics, Morgan Stanley said that Citi will execute its expense management program to accelerate capital return in 2015, while also exiting “higher risk-weighted assets.” Bank of America will also drive down expenses, the analysts argued.
At BankUnited, the market is “undervaluing the long-term EPS growth potential.” The analysts pointed to New York and Florida as strong markets for BankUnited. In a word of caution, the analysts noted that “shares could be volatile near-term” as a result of FDIC accretion.
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