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Bank of America was downgraded by analysts at Citigroup who reckon the US lender’s surge after the election has left the stock “fully valued”.

Keith Horowitz reduced his rating on BofA to “neutral” from “buy”, and cut his price target on the shares by $1 to $25. Citi also removed the North Carolina-based bank from its list of recommended stocks.

The bank’s shares have rallied by almost 40 per cent since the November election amid expectations that BofA would benefit from an expected uptick in economic growth prompted by Donald Trump’s pro-business policies and rate rises by the Federal Reserve.

BofA has a large domestic retail banking business, meaning it is considered to be particularly sensitive to fluctuations in the US economy.

The bank’s move higher has made the stock more expensive, leaving it priced at 12.8-times expected earnings over the next 12 months, from 10.93-times on November 8, according to FactSet data. The S&P 500 banks index trades at a forward p/e ratio of 13.10-times.

“We believe that the benefit of higher rates, the potential post-election improvement in regulatory and economic outlook are reflected in the current valuation,” said Mr Horowitz.

“In our view, a material improvement in the economic backdrop would be needed to move earnings forecasts higher from here”.

First-quarter reporting season for the largest US banks begins on April 13, with BofA slated to release its results the following week.

BofA’s shares slid almost 2 per cent in pre-market trading to $23.13.

Copyright The Financial Times Limited 2017. All rights reserved.
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