Market Overview

Bank of America Could Ring Up $27 Billion In Housing Losses

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According to analysts at Sanford C. Bernstein, Bank of America (NYSE: BAC) may be facing around $27 billion in housing related losses between now and 2013 amid a slowing economy and falling home prices. “The process of addressing legacy mortgage issues will be long and arduous,” the analysts said. “Recent declines in home prices and an uptick in employment trends create an upward bias to our loss estimates” for the lender. Despite the downbeat analysis, Bernstein has an "Outperform" rating on BAC shares.

According to Bank of America CEO Brian Moynihan, declines in the value of U.S. home prices in the future will likely be "incremental." The bank's stock price has fallen a staggering 24% over the last 3 months and lost another 1.55% on Tuesday despite a broad stock market rally.

The Bernstein analysts said that as long as BAC's housing losses do not exceed $55 billion, which is twice the firm's estimate, the bank should be able to boost Tier 1 capital to 8.5% by 2013 and avoid a dilutive share offering.

Paul Miller, an analyst at FBR Capital Markets, told Bloomberg Television today that a share offering is a possibility if the bank's earnings are wiped out by housing losses. He also said that he believes that Bank of America will ultimately be dismantled, although not in the near-term.

Bank of America is too big to manage at this point,” Miller said. “It's not going to happen tomorrow, it's not going to happen next year, but at some point down the road I think Bank of America will be broken up.”

Posted-In: Bloomberg Television FBR Capital Markets Paul Miller Sanford C. Bernstein & CoAnalyst Color Analyst Ratings Movers Media

 

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