Deutsche Bank downgraded Citi (NYSE: C) from Buy to Hold with a price target of $56.00 (from $61.00). Morgan Stanley (NYSE: MS) was downgraded from Buy to Hold with a price target of $30 (from $31). The change relates to the impact of Fed Taper and the end of QE.
"Given our bias for some dislocation in credit markets near term, further meaningful upside in bank stocks seems less likely. As a result, we are getting more defensive for now," said analyst Matt O'Connor.
"In the near term, the impact to markets and bank stocks is hard to predict and will likely be very dependent on macro data and the outlook for corporate earnings. On the one hand, if economic growth accelerates to the 3% consensus level in 2014 (from ~2% in 2013), additional P/E multiple expansion for banks (and the overall market) seems likely given rates remain low on an absolute basis, inflation is low and P/E multiples aren't stretched (although are in line with historical levels). On the other hand, we worry about the potential combination of widening of credit spreads and rising interest rates; and the impact these may have on cost of funding, certain industries that are rate sensitive (like housing, FICC trading) and certain emerging markets," he added.
2 down grades. Should sell off to $48 or less