Bank of America Named Top Franchise Pick by Jefferies on Asset Repricing Outlook

Jefferies has designated Bank of America (NYSE: BAC) as its top "franchise pick," arguing that a powerful, long-term tailwind from asset repricing will more than offset anticipated near-term weakness in investment banking revenue. The firm's analysis points to significant future growth in net interest income as low-yielding assets mature and are redeployed at higher rates.

Asset Repricing to Drive Future Earnings

The core of Jefferies' bullish thesis for Bank of America centers on the repricing of its fixed-rate asset portfolio, a process the firm describes as "early and back-end loaded." According to the note, approximately 90% of these maturities, totaling between $305 billion and $330 billion, are scheduled for 2027 through 2031.

This long-term catalyst is expected to support a medium-term compound annual growth rate (CAGR) in net interest income (NII) of 5% to 7%. Jefferies also projects the bank's net interest margin (NIM) will reach a target range of 2.30% to 2.40%, a notable increase from the 2.08% reported in the second quarter of 2026.

The repricing opportunity stems from several large, low-yielding portfolios, including:

• A $410 billion held-to-maturity (HTM) mortgage-backed securities book yielding just 1.9%.
• A $121 billion HTM Treasury book yielding 1.4%.
• A $226 billion residential mortgage book yielding 3.5%.

Near-Term Headwinds Acknowledged

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Despite the optimistic long-term view, Jefferies acknowledged that investment banking fees are a likely headwind in the third quarter of 2026. The firm cited Dealogic data projecting a 40% year-over-year decline in industry-wide fees for the quarter.

Jefferies' own model anticipates a more modest 21% decline for Bank of America, expecting a stronger performance in September. Analysts noted the weakness is concentrated in advisory and debt capital markets, but they view the softness as a "function of deal timing rather than franchise erosion."

Updated Forecasts and Valuation

Reflecting the near-term fee pressure, Jefferies slightly adjusted its earnings per share (EPS) estimates for Bank of America. The firm's 2026 EPS forecast was lowered to $4.65 from $4.70, and its 2027 estimate was trimmed to $5.30 from $5.35. Jefferies also initiated a 2028 EPS estimate of $5.90.

The investment bank believes that as Bank of America's earnings power improves, it will warrant a higher valuation multiple. Jefferies projects the bank will achieve a core return on tangible common equity (ROTCE) of 17.4% in 2027.