MKM Partners Initiates Buy on Bank of America on L-T Growth

In a report published Wednesday, MKM Partners analyst David Trone initiated coverage on Universal Banks including a Buy rating on Bank of America Corporation BAC and $18.00 price target. Trone commented that Bank of America's peers have seen significant declines in credit costs, “but Bank of America is more consumer-centric so its improvement has been even more significant.” With the company's exposure to the U.S. consumer during a steady economic recovery, the analyst sees the company perfectly positioned for growth. MKM Partners wrote, “Asset sensitivity of the balance sheet has continued to create NIM pressures and we believe will likely continue, improving only slightly in 2H14 and 2015. Revenue growth in 2013 was partly a function of solid gross loan growth, mitigated by run-off of legacy problem assets, mostly mortgage. Going forward, we expect this blend to turn more favorable, as run-off slows and new loan growth steadily improves.” The analyst expects “unspectacular” top-line performance in 2014 of possibly 2 percent, but forecasts Bank of America generating 10 percent in revenue growth in 2015. MKM sees 2 percent and 13 percent EPS growth in 2014 and 2015, respectively. Trone concluded, “we believe Bank of America will be able to return an increasing level of capital in coming years.” Shares of Bank of America closed at $14.53 on Tuesday and is currently trading at $14.63, up 0.69 percent.