Analyst: BofA with a market cap of only $65b needs $40-$50b of new capital

[Ruby the Liberal]

:wow:

This is so not good for the too-big-to-fail. Forgetting the dilution, their stock tanked another 8% today AND is trading at 1/7th of what it was before the crisis. Time to break them up.

(My prediction - they sell off Merrill)

Bank of America (BAC) insists it has more than enough capital, but the market clearly disagrees.
The stock was pounded again today in an up market, dropping 8% to $6.42. One analyst, Layla Peruzzi of Jefferies, thinks that Bank of America needs to raise an eye-popping $40-$50 billion.

-snip-

Three years ago, before the financial crisis, Bank of America's stock was trading above $50, more than 7X today's value. For two years after the financial crisis and disastrous purchase of Countrywide, the stock traded above $15, 2X today's value.

So the company had plenty of time to store acorns for a rough winter. But despite a near-death experience during the financial crisis two years ago, it never learned.

Read more: http://www.businessinsider.com/bank-of-america-may-need-to-raise-40-50-billion-of-capital-analyst-2011-8#ixzz1VnAMgrVK

[DJ13]

1. Not worth saving

The Feds should seize them, then break it up.

[abelenkpe]

14. +1000 nt

[truedelphi]

2. They have the attorney generals of both

New York State and Washington State biting after their hind quarters. Actions from the two AG's are due to the fraudulent practices of BoA in its foreclosure practices.

Attorney General for Washington State wants to reach back to foreclosures handled by BoA clear back to 2008!

Of course, Obama, being owned By Wall Street, will look the other way when Ben Bernanke slips BoA the money needed.

After all, BoA is too big to fail!

[Ruby the Liberal]

4. Delaware too.

Beau Biden jumped into the fray a week or so ago and attached Delaware to the NY State action.

[truedelphi]

6. Good to know. n/t

[dixiegrrrrl]

7. Allstate just filed suit against them this week.

trust fund mortgage fraud.

[Ruby the Liberal]

18. Was Allstate funding annuities with this trust

or was it an internal investment (if you know)?

[dixiegrrrrl]

22. dunno. None of the articles I read said.

[Ruby the Liberal]

23. If they are under contractural obligation on the annuity general fund

This could be a real mess. Moreso than taking a tax-writeoff/loss. That they can overcome, but annuities represent future obligations.

Why I wasn't too heartbroken when they chose Cordray for CFPB - once I read his bio and work in Ohio on this. If the handwriting was on the wall with soon-to-be Senator (D-MA) Warren, he was a brilliant choice.

[SheilaT]

3. Darn, I was hoping your

really meant $40-$50 dollars, not that amount in billions. I'd almost be tempted to send them five bucks if they actually needed so little.

[Ruby the Liberal]

5. Ha! Thanks for catching that in time to edit.

:toast:

They could cover that need with 2 $35 overdraft fees. :eyes:

[dixiegrrrrl]

8. And there is this, now, from Denninger:

Highlights:

He suggests the stock's dive is by insider trading
and he says:

"The market ( stock market's pricing, today )
says that this firm( BOA) has a "book value" of one third of the claimed value on it's balance sheet.
If this is true then the bank is bankrupt at least six times over.
Bank of America has its stock price under attack for the simple reason that nobody believes the bank's asset valuations.
The market believes the bank is underwater to the tune of six times its reserves and is factually bankrupt."

good read, I recommend.

http://market-ticker.org/akcs-www?post=192745

PS: anyone remember how long I have been saying BOA is going to go DOWN!?

[westerebus]

13. About the time they punked NY AG Spitzer.

Is about the first one I recall. Linda Green's signature was a popular rant at the time. No idea of the date, just the reference.

[Ruby the Liberal]

16. He makes a good point about prosecutions under SOX after 2007

If they couldn't see fit to add strings to the TARP bailout in the form of regulatory action, the least they could have done is fire up the SOX violation prosecutions.

I love Denninger when he talks the market, but he drives me batshit when he goes off on his drooling, foaming at the mouth Libertarian rants. Of course, Mish Shedlock is no better on that front, so there ya go, right?

[dixiegrrrrl]

25. I agree re: Denninger.

Today I was happy to see that he was pissed at Republicans! and vowed to never vote for one again.
But, as you point out, his insight into money and the markets has proven to be very accurate, and has helped me out a lot.

[Kat45]

9. Is my bank account in BAC safe?

Or should I bail? (Yes, I hate them too but I'm still in there for convenience, and because it will be a pita to have to set up a whole new online banking thing as well as change direct deposit things (like Paypal).

[Po_d Mainiac]

10. If/when BAC shits the bed

There ain't enough money in FDIC to cover insured accoucts...It would require a massive raise in the debt ceiling to stoke the FDIC.

There will be a run on this shithouse of a bank...The last ones through the door may SOL
YMMV

[dixiegrrrrl]

11. Lemme put it this way..

The reason my money is NOT in the big banks, and has not been for over 3 years:

FDIC is broke.
They are "supposed" to give you back your money, but there is NO law as to how long they can take and if they really can or will give you back ALL your money.

2nd point:
think long and hard on what "too big to fail" really means re: banks.
As in "those towers were too big to fall"

Do you really want to be standing around congratulating yourself on how much time and effort you saved by not moving your money?
How much money is worth the risk, and who do you trust to take care of your risk?

[Kat45]

28. Thanks to you guys for your replies.

Actually, most of my money is in a community bank. I have a smaller account in BAC specifically to pay my bills. (I also had my check direct deposited there, but since I don't have a job, that's not an issue now.) I could open another checking account in the community bank, but I'm not that comfortable with doing online banking where I have the larger accounts.

[Ruby the Liberal]

31. Tell them not to associate them.

Make sure that they don't allow online access to them and have them put up a firewall to protect the checking account you do want online access for.

With the Patriot Act, you are very limited as to how you can open/hold accounts, but if you talk with the branch manager, they may have some suggestions depending on how they interpret the laws of your state (and their technology capabilities*) on how you can accomplish what you want to do and be comfortable with it.




*Some banks may not be capable of putting firewalls between accounts...

[Kat45]

32. Thanks.

I have a feeling my bank might be one that can't do that but I can talk to them to find out.

[Ruby the Liberal]

15. I can't advise one way or another

But I will offer that I closed all of my accounts earlier this year while I was still working for one of their subsidiaries.

The FDIC thing scares me. Credit unions are insured, but not tied to the FDIC system.

Do what you think is right.

[dixiegrrrrl]

12. f BOA blows - and the market is saying it's going to - it won't matter what they try to do.

"There is neither ability or will to stop the collapse that will result from that."

So says Denninger today, same link as I provided in previous post here.

We shall see....

[Ruby the Liberal]

17. We need to start a pool

I am thinking they are going to gut MerrillEdge with the first round of 3,500 job cuts this week and move it out of the branches and back into the call center with a refocus on self-directed investing. Divesture of Merrill proper by the end of November. IPO it or sell it outright to JP Morgan Chase or UBS. Too much overlap with Morgan Stanley to make that profitable and too low end (avg asset size) for Goldman.

Any takers? :D

[Po_d Mainiac]

19. Naw ...

They'll get more money by spinning of Countrywide :rofl:

[Ruby the Liberal]

20. Angelo Mozillo is still laughing his ass off for pulling the wool over Ken Lewis

on that deal. Probably almost as hard as John Thain is from his deal.

:rofl:

[dixiegrrrrl]

21. I know that both Citi and BOA have sent letters to customers

saying that new address for billing is now Citibank N.A. and Bank of America N.A.
and that previous addresses for mailing mortgage or credit card payments will be no good effective July 1.

Which means they both are closing offices and re-organizing divisions, if i read that right.

[Ruby the Liberal]

24. I can't speak to Citi

but BoA has been working for 2.5 years now to consolidate divisions and streamline systems from the Countrywide/Merrill mergers. Citi did sell Smith Barney to Morgan Stanley, so may be the same situation.

[Po_d Mainiac]

26. That's a scheme used in the past

Payments go to wrong address, penalty for late payment follows.

[roamer65]

27. Zombie bank.

Not good with the credit markets seizing up in Europe.

[Ruby the Liberal]

29. Wild day for Bank of America!!

First, they got into a pissing match with Henry Blodgett (former Merrill), blaming him for causing their stock to tank. First time I have *ever* seen a company singling out and blaming a lone blogger for moving the market against them.

Links:

Blodget's take on capital requirements: http://www.businessinsider.com/bank-of-americas-stock-collapse-2011-8

BAC's bizarre response (and personal attack): http://www.businessinsider.com/analyst-bank-of-americas-bizarre-personal-attack-on-henry-blodget-suggests-something-is-seriously-amiss-2011-8


Then, confirming my prediction (stated above) that JP Morgan would be the likely one to take over Merrill (if not the whole bank), that rumor is now flying around the street because JPM this morning bizarrely upgraded their BAC outlook without explanation:

JP Morgan rumor: http://www.businessinsider.com/rumor-jp-morgan-may-take-over-bank-of-america-2011-8

JP Morgan's bizarre upgrade of BAC: http://www.businessinsider.com/rumor-jp-morgan-may-take-over-bank-of-america-2011-8

[Ruby the Liberal]

30. Interesting Read: Calling for the nationalization of BAC (and steps to make it happen)

This is definitely worth a read for anyone interested in this kind of thing (the Swedish Solution)

http://www.businessinsider.com/all-right-its-time-for-a-new-kind-of-bank-of-america-solution-the-right-kind-2011-8