Major Bank Ratings | Citi: Market Overly Concerned About US Bank Spending Growth, ROTCE Improvement Trajectory Unchanged

Glonghui January 15｜According to a report by Citi, Bank of America’s stock price dropped by 3.8% following the release of its fourth-quarter results, which the bank believes may be an overreaction from the market. This was mainly due to investors’ negative interpretation of the 2026 operating leverage guidance, concerns about accelerating growth in operating expenses, and management’s failure to set an upper limit on spending, all of which contributed to selling pressure. However, Citi believes the market has not yet fully recognized Bank of America’s normalized profitability after the recovery of its net interest margin, and that the current stock price offers attractive value. Citi expects Bank of America’s operating leverage in 2026 to be slightly above the guided 200 basis points, with annual operating expense growth projected at around 4%, and net interest income CAGR reaching 5% to 7%. Return on tangible common equity (ROTCE) is expected to reach 15% in 2026 and further improve to 16% in 2027, with the possibility of achieving this ahead of schedule. Citi reiterates its “Buy” rating on Bank of America, with a target price of $62.