Tuesday, August 23, 2011

"Bank of America: Could it Need $200 Billion in Capital?" (BAC)

Oh dear. At this mornings price of $6.09 (down 33 cents) the company's market capitalization is $61.8 Billion.
There may be "Substantial Dilution" in the wings.
From MarketBeat:
Bank of America shares are bouncing back this morning from a ghastly fall yesterday, but worries about the bank haven’t gone away.
Shira Ovide over at Deal Journal points out there’s at least one relative optimist out there, who thinks the market is too worried about the bank’s need to raise capital.

This is in contrast with Jefferies analysts, who said yesterday that the bank needed $40 to $50 billion in fresh capital.

And this view really, really clashes with that of Henry Blodget, who this morning writes that the bank might need $100 to $200 billion in fresh capital.

Building on groundwork laid by Zero Hedge and Yves Smith, Mr. Blodget runs through all of the chunks that should be bitten out of BofA’s $222 billion book value and concludes:
So, taking some back of the envelope numbers, it looks as though we could easily come up with, say, $100-$200 billion in write-offs and exposures to “clean up” Bank of America’s balance sheet.
A $100-$200 billion hit to Bank of America’s $222 billion of equity capital, needless to say, would do some serious damage. Specifically, it would force the company to raise about the same amount to restore its capital ratios....MORE
Do read the comments at MarketBeat.
I've got my own reasons for not caring much for Mr. Blodget.