Bank of America’ shares could fall to $9

According to Reuters, Paul Miller of FBR (Friedman, Billings, Ramsey Group Inc) rated Bank of America (BAC) to underperformed. The Analyst said the stock could fall as low as $9. BAC's equity ratio is too low. Additionally, Miller expected that the bank will have to raise a "substantial" amount of capital, diluting existing shareholders.

Miller recommended investors to stay away from the stock until this initial raise is complete. The Bank acquired mortgage lender Countrywide in July and in September agreed to acquire Merrill Lynch (MER) has thin capital, and should cut its quarterly dividend to one cent from 32 cents to conserve its capital.

The Bank would cut up to 35,000 jobs over three years, reflecting its pending purchase of Merrill Lynch and weaker business activity. Bank of America and Merrill Lynch have received a total of $25 billion under the U.S. Treasury Department program to boost banks.

Miller estimates the bank will lose $77 billion, or 8.1 percent of its total loans, in the coming years.

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Sources :

Reuters: Bank of America stock could sink to $9: analyst, December 15, 2008 11:29pm EST

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