HSBC is turning cautious on three of the biggest US bank stocks following a record rally that’s brought the group within shouting distance of an all-time high.
“Downside risks associated with still-elevated macro uncertainty, potentially slowing economic growth and more interest rate cuts through 2025 and 2026 are generally not factored into the stock prices,” analyst Saul Martinez wrote in a note downgrading JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp. At the same time, “the repricing of fixed-rate assets, benign credit quality, improving investment banking activity, and a favorable regulatory backdrop are well priced in.”
The analyst lowered the recommendations on JPMorgan and Goldman Sachs to reduce from hold, while downgrading Bank of America to hold from buy. The cuts came as the KBW Bank Index snapped an 11-day winning streak on Monday, its longest ever run of gains. The benchmark of leading lenders remains roughly 3% shy of its January 2022 record.
Shares of JPMorgan, Goldman Sachs and Bank of America each fell more than 1% after the open on Tuesday, making them the biggest decliners in the KBW index. JPMorgan and Goldman Sachs have surged around 35% and 50% from early-April lows, respectively, and recently notched all-time highs. Bank of America has rallied nearly 40%. The advances came as markets broadly rebounded from the selloff sparked by US President Donald Trump’s trade war, and as investors bet on upside from earnings prints, stress test results and loosening regulations.
Wall Street is divided on what comes next. Wells Fargo’s Mike Mayo said last month that as long as there wasn’t a recession, it’s “game on” for US bank stocks to run higher. Baird, meanwhile, slashed its own ratings on JPMorgan and Bank of America citing valuations.
At HSBC, Martinez took a more positive stance on super-regional banks. Lenders like U.S. Bancorp, PNC Financial Services Group Inc. and Truist Financial Corp. — all rated buy — are more attractively valued even after their own rallies, the analyst wrote.
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