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BofA Downgraded on Earnings Concerns: Baird Analyst

Robert W. Baird senior research analyst David George told CNBC he downgraded Bank of Americabecause he is concerned the bank won't maintain strong earnings after it finishes divesting assets to maintain capital requirements.

The banking sector as a whole has been up since December because of "one big sentiment shift," the analyst said Tuesday, providing a "fairly meaningful move in BofA shares" upward by about 76 percent. Passing the Federal Reserve's recent round of stress testsdidn't hurt the bank either.

But George doesn't think that strength can be maintained.

He downgraded BofA to “neutral” from “outperform,” but increased the price target to $10 from $9. George also raised his 2012 earnings estimate on the bank to 65 cents a share from 50 cents, seeing a good first quarter, but lowered it for 2013 to $1.10 a share from $1.20 because of his concerns on earnings next year.

Three months ago, when Bank of America's stock was at $5 a share, George and other analysts were concerned the bank wouldn't have enough liquidity and capital to survive Dodd-Frank, Basel 3, and other rules mandating minimum capital requirements for banks. "Those fears were more than unfounded," as it turned out, he said.

But at $10 a share, the concern now is not whether the bank has enough capital, but its "earnings power given all the divestiture," George said. He would tell investors not to buy the stock.

He prefers JPMorgan Chase, which he said has had "a very nice move" in its stock and is cheaper than Bank of America.

In addition, George said, "JPMorgan is returning almost all of its earnings to shareholders in the form of buybacks and dividends, and BofA is not."

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Trader disclosure: On March 27, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Pete Najarian is long calls in AAPL; Pete Najarian is long calls in BAC; Pete Najarian is long calls in JPM; Pete Najarian is long calls in MS; Pete Najarian is long calls in SBUX; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long INTC; Pete Najarian is long YHOO; Pete Najarian is long COP; Pete Najarian is long PEP; Pete Najarian is long PFE; Steve Weiss is long BAC; Steve Weiss is long JPM; Steve Weiss is long TBT; Steve Weiss is long TBF; Steve Weiss is long EUO; Steve Weiss is long QCOM; Steve Weiss is short FXA; Steve Weiss is short BTU; Steve Weiss is short X; Steve Weiss is short AAPL PUTS; Steve Cortes is long PPH; Steve Cortes is long DEO; Steve Cortes is long RGR; Steve Cortes is long MO; Steve Cortes is long GOOG; Steve Cortes is long TREASURIES; Steve Cortes is short AAPL; Steve Cortes is short XLI; Steve Cortes is short DB; Steve Cortes is short CAT; Steve Cortes is short SILVER; Patty Edwards is long PM; Patty Edwards is long for clients V; Patty Edwards is long for clients AAPL; Patty Edwards is long for clients GLD; Patty Edwards is long for clients INTC; Patty Edwards is long for clients JOY; Patty Edwards is long for clients SBUX; Patty Edwards is long for clients COP; Patty Edwards is long for clients VLO; Patty Edwards is long for clients AMZN; Patty Edwards is long for clients HD; Patty Edwards is long for clients MAT; Patty Edwards’ father is a long term employee and owns stock in SWY;

For David George

Robert W. Baird & Co. Incorporated and/or its affiliates expect to receive or intend to seek investment banking related compensation from BAC

CNBC.com with wires.

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