Bank Of America VS. JPMorgan? Investors Say One Stock Is Set To Soar 45%

Bank stocks in both large and small markets have taken a hit as a result of the recent banking crisis as well, not just regional bank stocks.

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There are those who believe that the recent slide is overdone, and retail investors swooped in to buy the dip in last week's shares of the traditional, biggest American banks.

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Although it sounds like the bull market has run its course, there may still be some room to run. JPMorgan almost went down 6% last week, while Bank of America went down 8%. Citigroup lost close to 8%.

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Ben Emons, senior portfolio manager at NewEdge Wealth Management, wrote a note on Sunday stating that he believes that financial stocks may reverse their oversold levels as the conditions continue to ripen for strong rebounding in bank stocks.

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Polcari, the chief market strategist at SlateStone Wealth, said that investors with a strong stomach can take advantage of the pullback, referencing stocks including JPMorgan, Bank of America, Citigroup and Wells Fargo, saying, "it's a great opportunity."

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A recent note from UBS predicted that large-cap bank valuations are likely to recover from the lowest point since the liquidity crisis, published on Mar. 16th.

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JPMorgan Chase, Bank of America, Wells Fargo, and Citi look to be big beneficiaries of the economic downturn and the fundamentals of all these firms look strong. According to UBS, all three of these banks are benefiting from “fully scaled, granular” retail deposits, and Citi is popular with multinational companies that utilize its “best-in-class” treasury services, according to the bank.

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There are a number of analysts who are predicting the performance of JPMorgan Chase and Bank of America in particular, which can give investors some insight into investments.

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It is true that the balance sheet of Bank of America has been summed up as a "fortress," which speaks to its stability and fortress nature. With this in mind, Vance Howard, CEO of Howard Capital Management, told Trade Algo that while he would be patient for the banking crisis to settle if investors wished to invest in this market, he would pick Bank of America.

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This is a view echoed by Cole Smead, CEO of Smead Capital Management, who said that if interest rates rise, it will benefit lenders who do not do dumb things with their assets and do not look for quick fixes.

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The weakness of the stock market has caused investment banks to lag behind, but the performance of commercial banks has been much better than that of investment banks, according to Michael Taylor. He mentions Bank of America (and JPMorgan) as stocks he particularly likes.

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He has the same opinion about JPMorgan as Howard has about Bank of America. However, Howard thinks Bank of America is faring better than JPMorgan right now in terms of risk to reward, which makes it a better choice.

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I think this stock has the potential to weather the storm and potentially be a good long-term investment for investors when it comes to the future," he explained.

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Moreover, UBS stressed that the underperformance of Bank of America's stock last week is "befuddling," adding that BAC has a compelling opportunity at these levels because, prior to flight-to-quality benefits, the deposit base was already one of the best in the country, the capital was strong, and liquidity was strong, and BAC's balance sheet was built from a decade of “responsible growth,” so it could be especially useful in the event of a downturn (which seems inevitable at this time).

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After the collapse of Silicon Valley Bank in December of 2008, there has been a lot of focus placed on the issue of uninsured deposits, especially since the bank held a large amount that was not covered by the Federal Deposit Insurance Corporation.

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According to data from Raymond James dated Mar. 16, which is the second-lowest ranking in a ranking of the top 100 U.S. banks, Bank of America had only 8% of its deposits that were uninsured as a proportion of its total deposit liabilities.

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On average, according to Trade Algo, the analyst covering the stock believes the stock could have a 45% upside, and 50% believe it has a buy rating.

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Bank of America: 'Battle-tested'

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A series of notes issued by Wells Fargo in recent weeks has been bullish toward JPMorgan Chase. The bank has upgraded the stock from overweight to overweight and raised its price target to $155, suggesting that there can be approximately a 23% upside for the company.

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As Wells Fargo said, JPM has been tested in downturns. In terms of leverage (almost 1/3 of what it was before the global financial crisis), liquidity (more than 50% more), and losses (structurally lower), it is the most representative of the de-risking that the bank industry has undergone since the [global financial crisis].

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In a Mar. 20 note, Morgan Stanley stated that they were skewed towards defensive stocks, as well as favored large banks. Specifically, JP Morgan was cited as the stock that is overweight in the report, as being the bank with the strongest capital, excess liquidity, a more resilient deposit base, and/or better quality loan books that it is looking to sell.

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A certain amount of capital is distributed to U.S. banks, so they would likely be prepared for any credit Suisse issues, according to analysts at Wells Fargo. According to a note they wrote before the UBS sale, U.S. banks would also likely have been prepared for Credit Suisse issues, according to analysts at Wells Fargo.

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Analysts at UBS and Deutsche Bank said that JPMorgan is the "strongest" bank, and Citibank will also benefit from the merger.

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JPMorgan Chase now ranks 73rd out of the major 100 U.S. banks based on the Raymond James data, when it comes to the percentage of uninsured deposits as a percentage of the total deposits liabilities compared to Bank of America, with 27,2% of uninsured deposits as a percentage of total deposits liabilities.

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The average analyst rating for the stock according to Trade Algo is "Buy," with 63% suggesting that the stock has a potential upside of 25%.