On October 6th, AdvisorHub first reported new that was then confirmed by Bank of America Corp (NYSE:BAC) of the intention to end commissions on retail retirement accounts commencing April 10th, which is the first deadline for the Department of Labor’s fiduciary rule.
In reaction, UBS analyst Brennan Hawken reiterates a Buy rating on BAC with a price target of $18, which represents just under a 12% increase from where the shares last closed.
The Bank of America Merrill Lynch does not plan to use the Best Interest Contract (BIC) exemption and Hawken notes this decision might differ from what other wealth management (WM) firms opt to do. To Hawken, this further highlights “the potential for differing strategies for compliance with this rule. While this approach might reduce legal liability, it may also create an opportunity for competitors to attract FAs from BAML who would rather use the BIC to allow for greater flexibility in their business.”
Moreover, the analyst believes, “We see the downstream implications for asset managers as actually more profound than for WM firms. In our view, this is a negative for active asset managers that rely on the broker sold channel, BEN and (to a lesser extent) IVZ in our coverage, and we expect these firms could experience accelerating outflows from these changes.”
Ultimately, “We believe BAC’s more stable funding base and leverage to the better growing domestic market should help the shares outperform,” Hawken concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst Brennan Hawken is ranked #585 out of 4,183 analysts. Hawken has a 72% success rate and gains 6.0% in his yearly returns. When recommending BAC, Hawken earns 9.4% in average profits on the stock.
TipRanks analytics demonstrate BAC as a Strong Buy. Based on 21 analysts polled in the last 3 months, 17 rate a Buy on BAC, while 4 maintain a Hold. The consensus price target stands at $17.88, marking a nearly 11% upside from where the stock is currently trading.