Bank of America Unfazed by Estimate Cut

NEW YORK (TheStreet) -- Bank of America (BAC) shares edged higher early Tuesday, shrugging off a bearish analyst note predicting pressure on near-term earnings.

The Charlotte, N.C.-based lender's stock rose 7 cents to $15.92 in morning trades. Shares are still up 23.4% for the past 52 weeks, but have pulled back almost 17% since reaching a 52-week high of $19.10 on Oct. 15, the day before the release of its third-quarter financial results.

JPMorgan analyst Vivek Juneja cut Bank of America's fourth-quarter profit estimate to break-even from 6 cents a share, and the firm's 2010 profit estimate to 80 cents from 90 cents.

Juneja still holds an overweight rating on Bank of America shares for the long-term. However, he expects a weak interest-rate environment and a broad pullback in lending to hurt near-term results. Credit costs are also likely to remain high, but Bank of America's recent reports on its securitized credit-card trust have shown some improvement. Juneja expects charge-offs to peak in the second quarter, but at a lower level than initially expected.

While Bank of America's strong capital markets business should help, the analyst doesn't believe it can offset all of the downside.

" We do not expect of [Bank of] America to trade at a premium near term, as similar to peers, the stock could remain volatile due to a high level of credit losses and uncertain revenues," Juneja wrote.

In a note on the broader industry, the analyst said that banks are now hoarding cash and holding back on lending to cover credit costs. Though some types of loans have been performing better, the picture is mixed and the future uncertain amid high unemployment. Juneja also cut estimates for Wells Fargo (WFC), Regions Financial (RF), SunTrust (STI) and Fifth Third (FITB), while boosting his estimates for U.S. Bancorp (USB). Their stocks were mixed, but not changed very much from Monday's close.