Comstock Images
BofA Securities upgraded Ally Financial (NYSE:ALLY) to Buy from Neutral as analyst Brandon Berman sees upside potential to management’s $6 medium-term earnings target and lower earnings volatility from recent balance sheet actions. Furthermore, potential credit leverage may be underestimated, he said.
Ally (ALLY) stock rose 2.4% in Tuesday premarket trading.
While the effect that rate cuts will have on Ally’s (ALLY) funding costs is widely understood, “we see limited risk to NII (net interest income) estimates if (the) Fed doesn’t cut rates in ’24,” the analyst wrote in a note to clients. “In fact, we see the benefit from rate cuts as having a muted impact to NIM (net interest margin) in ’24.”
He explained that fewer rate cuts translate to a smaller headwind to asset yield. At the same time, Ally (ALLY) has started to reduce rates paid on deposits without a notable impact on balances.
On the credit side, Berman…
