Citi Upgrades Bank of America

In a report published Thursday, Citi analyst Keith Horowitz upgraded Bank of America (NYSE: BAC) to Buy with a $19.00 price target, while continuing to see value in JPMorgan (NYSE: JPM).According to the report, the price target implies a 23% expected total return. The analysts believe BAC has built-in earnings drivers on the cost side which puts us slightly ahead of consensus. They further note that if US economy continues improving, investors will look to BAC (and JPM) as a play on US economy due to asset sensitive balance sheet and exposure to US consumer. “We see similar value in JPM, and are raising the target price to $72 with an expected total return of 27%,” the report said. “We expect JPM to beat modestly in 4Q13 and BAC to report in-line results for 4Q.”The analysts see BAC reporting 4Q EPS of $0.26, which came close to the consensus of $0.27. The slight 1c change is due to higher legal costs from ongoing mortgage litigation, partly offset by stronger ECM revenues due to record IPO issuance, the report said. “Our favorite way to look at valuation is by comparing the implied cost of equity (and beta) for each of the stocks which takes into account where the stocks are trading and factoring in our near and long term return estimates, and then simply solving for the discount factor,” the report said. “One can see that BAC has the most elevated cost of equity, which we believe can fuel outperformance in the stock as legacy issues are resolved.”JPM closed Tuesday at $58.12.BAC closed Tuesday at $15.96 with shares trading up 2.56%.