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Dec 20 (Reuters) - Credit Suisse initiated coverage on Wachovia Corp WB.N with an "underperform" rating, as it expects market disruption to affect earnings growth at the company, and started Bank of America Corp (BAC.N) with a "neutral" rating, saying the bank possesses a solid distribution platform.
The brokerage, which set a price target of $48 on Bank of America's stock, said the bank has solidified its best-in-class national consumer distribution platform with leading market positions in 16 of the 20 fastest-growing states.
However, Bank of America's corporate and investment bank remains levered to fixed income capital markets and is vulnerable to markedly lower revenues, incremental trading losses, and inventory write-downs over the near-term, the brokerage said.
The brokerage, which has a price target of $35 on Wachovia, said the increasing frequency and severity of consumer related losses are likely to further pressure the company's relatively low reserve level and thin capital base.
Wachovia remains levered to the disruption in fixed income capital markets, residential housing, and commercial real estate sectors, which are key earnings components for both the general and corporate investment bank. (Reporting by Shamik Paul in Bangalore; Editing by Pratish Narayanan)