A Bank of America logo is seen on the entrance to a Bank of America financial center in New York City, U.S., July 11, 2023. REUTERS/Brendan McDermid

By Arasu Kannagi Basil and Nivedita Balu

(Reuters) -Bank of America raised a closely watched profitability target on Wednesday as CEO Brian Moynihan laid out a fresh plan to catch up with Wall Street rivals that includes tech investments and an expansion strategy in order to grow market share.

Moynihan and other top executives are convening in Boston for the bank's first investor day since 2011 to answer concerns about returns that have trailed peers in the past.

BofA is now targeting a 16% to 18% return on tangible common equity (ROTCE) - a key metric investors use to assess a bank's performance - in the medium term, compared with its earlier forecast of mid-teens return, aiming to narrow the gap.

The bank generated a 15.4% ROTCE in the third quarter, while larger rival JPMorgan achieved a 20% ROTCE in the same period, filings showed. Analysts had expected BofA to set a target of between 16% and 18%.

"ROTCE goals put BofA in the upper tier of peers. New targets appear achievable, though not particularly aggressive," Argus Research analyst Stephen Biggar said.

Analysts at Barclays said the ROTCE target could have been better by 100 basis points, noting that other targets were in line or better than expected.

As a part of the plan, the lender is aiming to expand in six additional markets through 2028, including in Alabama, Louisiana and Ohio, giving it access to over $222 billion in deposits, targeting student, family and employee banking.

For investment banking, another key business, it aims to increase its share of fees by between 50 and 100 basis points in the next three to five years.

In the global investment banking league tables, BofA has consistently lagged rivals JPMorgan and Goldman Sachs over the years.

On the trading front, BofA said it is aiming to capture 9% of the industry revenue pool in the medium term. It now has a 7.6% market share.

"Market share gains are much easier said than done, and peers will also be stepping up their game as the investment banking environment continues to improve," Biggar noted.

Shares of BofA were down 1.1% in premarket trading in New York.

CONSUMER CREDIT STABLE

BofA said U.S. economic growth remains solid even as employment data shows signs of weakness, with consumer spending up 5% this year based on the bank's data.

"Consumer credit is stable; lower end of credit spectrum a watch item especially if labor market softens," BofA said.

BofA expects net interest income - the difference between what banks earn on loans and pay on deposits - to grow by 5% to 7% annually over the next five years, driven by loan growth and fixed-rate asset repricing. Profit per share is expected to grow more than 12%.

Following a rocky start after Moynihan took the helm in 2010 in the aftermath of the 2008 financial crisis, he engineered a momentous turnaround, driven by an oft-repeated mantra of "responsible growth," but investors are urging the bank to make a higher return on its investments.

(Reporting by Saeed Azhar in Boston, Arasu Kannagi Basil in Bengaluru and Nivedita Balu in Toronto; Editing by Arun Koyyur and Mark Porter)