UBS cut its price target on BAC by 48%

According to Reuters, Bank of America is continuing to face further credit risk and losses after acquired Countrywide Financial Corp and bought Merrill Lynch. The Bank has more than $250 billion in residential mortgages from Countrywide acquisition and charge offs in the portfolio are increasing as BAC has stopped offering some of the most toxic types of mortgages.

Today, UBS cut its price target on Bank of America Corp (BAC) by 48 percent, citing tighter credit conditions, uncertainty over near-term prospects of the Merrill Lynch & Co (MER) deal and risk of additional write-downs.

Tight credit conditions will continue into 2009 as banks focus on maintaining sufficient capital and liquidity levels in a difficult operating environment, analyst Matthew D O'Connor said in a note to clients.

"This will likely put further pressure on both consumers and commercial borrowers, leading to higher credit losses in 2009," he said.

Analyst O'Connor said there is a risk in Merrill's earnings power as its businesses related to capital markets are facing continuous pressure, and recent widening of credit spreads could mean additional write-downs at both Bank of America and Merrill.

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Sources :

Reuters: UBS slashes target on Bank of America by 48 percent, November 28, 2008 11:18am EST

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