Bank of America Needs Capital, Stock May Sink 36% to $9, FBR's Miller Says (Update1)
By David Mildenberg
Dec. 15 (
Bloomberg) -- Bank of America Corp. will need to raise more capital to offset rising loan losses, and the stock may sink to $9, according to Friedman, Billings, Ramsey Group Inc. analyst Paul Miller.
The bank should cut its quarterly dividend to a penny from 32 cents and conserve as much capital as possible, Miller wrote in a report issued today as the stock closed at $14.11. He rated shares of Charlotte, North Carolina-based Bank of America “underperform.” Miller finished first among bearish analysts in a June ranking of the world’s best stock pickers compiled by Bloomberg.
“While Bank of America’s capital will be rebuilt over time, we expect that it will have to raise a substantial amount of new common capital to jump-start the process, which will dilute existing shareholders,” Miller wrote.
Bank of America Chief Executive Officer Kenneth Lewis is buying Merrill Lynch & Co., the world’s largest securities firm, after the July purchase of Countrywide Financial Corp. The bank said last week it plans to cut as many as 35,000 jobs over three years as it seeks annual after-tax savings of $4.5 billion from the Merrill transaction, now valued at $18.6 billion.
Bank of America doesn’t comment on analyst reports, spokesman Scott Silvestri said.
The combined Countrywide, Merrill Lynch and Bank of America have $83 billion of tangible common equity supporting $2.6 trillion of tangible assets, a 3.2 percent cushion that Miller calls too small. .......(more)
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