Bank of America thinks it’s time to sell Ally Financial as the company faces slowing loan demand and a troublesome macro picture. Shares shed more than 3% in the premarket after analyst Brandon Berman double-downgraded the stock to underperform from buy, saying that macro factors will weigh on fundamentals in the near term. “Rising interest rates are pushing funding costs higher while simultaneously causing loan demand to slow,” he said in the note to clients Thursday. “Moreover, we think investors will need to see evidence of credit quality performing better than expected before rewarding shares.” Near-term challenges within the used car market create uncertainty surrounding loan growth in the new year, Berman said. Credit risks also linger, with deposit costs like to impact estimates in 2023. Competitive deposit rate offers could also bring earnings per share below the $4 level, Berman wrote. To reflect these concerns, the analyst trimmed the bank’s price target to $26 from $35 a share and adjusted earnings per share estimates to below consensus expectations. The new target suggests shares remain range bound near term after selling off nearly 49% in 2022. “We expect bank stocks to outperform pure-play lenders in the current economic backdrop, at least until investors feel confident downward EPS revisions have bottomed out,” Berman wrote. — CNBC’s Michael Bloom contributed reporting
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