Odeon Capital has downgraded Bank of America (NYSE:BAC) to Hold from Buy, citing concerns that interest rates may not decline as much as previously expected. This decision comes as analyst Dick Bove, who upgraded the stock to Buy about a month ago, anticipates the sustainability of high rates.

Dim Earnings Outlook and Market Share Loss

In a note to clients, Dick Bove expressed a bleak outlook on the bank’s earnings, attributing it to potential stress in the economy, weakening labor markets, rising loan losses, and corporates losing pricing power. He further pointed out that Bank of America reported a decline in adjusted EPS, signaling an unlikely return to 2023 levels until possibly 2026.

With the December CPI report indicating a 3.3% gain, and a 5.5% increase when excluding energy prices, Bove argued that the Federal Reserve is likely to maintain elevated rates to exert more downward pressure on prices. This could potentially impact Bank of America’s various business lines.

Moreover, Bove highlighted that Bank of America has been losing market share in lending, trailing behind both capital markets and non-bank lenders, a trend he fears may continue.

Flat Earnings and Narrow Trading Range Predicted

Bove’s outlook for Bank of America foresees flat earnings throughout the year, resulting in a likely narrow stock trading range of $28-$33 for 2024. He views the bank’s expectation for six rate cuts in 2024 as “delusional.” His current Hold rating on Bank of America stands in contrast to other ratings such as Strong Buy from SA Quant and Buy from both SA Analyst and average Wall Street ratings.