Bank stocks may look "deceptively attractive" heading into Q3 earnings after their recent pullback, but macro headwinds could keep them languishing, BofA Securities said.
Investors are increasingly concerned about how long the economic and capital markets cycles can last given higher interest rates, volatile oil prices, and uncertainty around artificial intelligence, the analysts said in a note Wednesday.
"We believe increased visibility on the path of interest rates will be imperative for investors to regain confidence in the economic cycle, and for bank stocks to re-rate," the analysts added.
Ally Financial (ALLY) faces delayed net interest margin, or NIM, expansion due to higher deposit costs and residual lease losses, while Columbia Banking System's (COLB) 4% plus NIM outlook has come under pressure but remains intact, according to the note.
Texas Capital Bancshares' (TCBI) smaller balance sheet and potential rate hikes should support net interest income growth, though rising deposit costs could limit NIM expansion in 2027, the analysts added.
BofA lowered its price target on Ally Financial to $44 from $49, on Columbia Banking System to $35 from $37, and on Texas Capital Bancshares to $108 from $115.
Price: 37.15, Change: -0.22, Percent Change: -0.59