Bank Of America Breaks Down The Brokerage Sector

Earnings season is coming fast for capital markets stocks, and Bank of America analyst Michael Carrier has re-positioned several of his stock ratings ahead of what he sees as a decent overall quarter. According to Carrier, trends in the third quarter were mixed and included rising markets and short-term interest rates, but also relatively low volume and a weaker dollar.

“Beyond 3Q, with decent activity, favorable markets, a better rate outlook, progress on de-regulation and potential pro-growth policies (tax reform), we continue to see some attractive opportunities, although risks are higher as we move later in the cycle & given elevated valuations,” Carrier wrote.

Carrier downgraded TD Ameritrade Holding Corp. AMTD from Buy to Neutral based on its extended valuation and the relatively high market expectations.

In addition, Bank of America downgraded Nasdaq Inc NDAQ from Neutral to Underperform due to its lack of capital management flexibility and increasing competitive headwinds.

At the same time, the firm upgraded E*TRADE Financial Corp ETFC from Neutral to Buy. Carrier said E-Trade should continue to benefit from additional deposits, core growth and potential M&A opportunities.

Bank of America also upgraded Virtue Investment Partners Inc VRTS from Underperform to Neutral. Carrier said the company has demonstrated decent investment performance and has the potential to expand its margins further.

In addition to the ratings changes, Carrier also listed Bank of America’s top stock picks ahead of earnings season across the entire capital markets sector:

• Goldman Sachs Group Inc GS.
• Charles Schwab Corp SCHW.
• CME Group Inc CME.
• Affiliated Managers Group, Inc. AMG.
• The Carlyle Group LP CG.
• Northern Trust Corporation NTRS.

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