By David Mildenberg
April 14 (Bloomberg) — Bank of America Corp., the largest U.S. bank, is not as well capitalized as most of its peers and has “precious little wiggle room” before it may be forced to sell new stock, according to Wachovia Capital Markets LLC.
Bank of America retains “sizeable exposures to what we would deem are worrisome assets,” including $148 billion in home equity loans and credit lines and $111.5 billion in credit- card and other revolving loans, Wachovia’s Matthew Burnell said in a report dated yesterday. He initiated coverage of Charlotte, North Carolina-based Bank of America at “underperform” with a valuation range of $7 to $8 a share.
Burnell joins Michael Mayo of Calyon Securities and Paul Miller of FBR Capital Markets among analysts who said Bank of America may need to raise capital this year because of borrower defaults. The lender raised $10 billion in October selling stock, and the U.S. government has purchased $45 billion in preferred shares to bolster the firm.
Burnell expects Bank of America to lose 13 cents per share this year, mostly because of higher credit costs in its consumer and small business banking unit. The average estimate of 21 analysts compiled by Bloomberg is a 39-cent profit in 2009.
Bank of America doesn’t comment on analyst reports, said Scott Silvestri, a spokesman.
