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NEW YORK (
Goldman Sachs(GS - Get Report) analysts said that
Bank of America (BAC - Get Report) will benefit from the boost in confidence following
Berkshire Hathaway's(BRK.A) $5 billion investment, even though several other concerns persist.
In a Friday morning report, the team of analysts led by Richard Ramsden said legendary investor Warren Buffett's investment provided only a minimal common capital benefit, echoing other market analyst views.
While sentiment would likely improve, "several key overhangs still remain including the servicing settlement, concerns over its put-back settlement and mortgage litigation risk, and macro uncertainty," the analysts said. "While sizing these can prove to be challenging, the market appears to be pricing in an overly adverse outcome or a massively dilutive capital raise, neither of which we believe will happen. Even if losses related to these come out on the high end of our expectations, we believe BAC can absorb $40 bn of losses over the next few quarters and still have a 6% Basel III capital ratio at 4Q12."
Goldman expects Bank of America to continue shedding non-core assets, which should calm market fears on capital.
The analysts dropped estimates for 2011 and 2012 earnings to a loss of 26 cents per share and profit of $1.20 per share respectively to reflect the impact of Buffett's investment. They, however, maintained the 12-month price target at $10, which is a 33% upside from current levels.
Shares of Bank of America were trading 2% lower at $7.51 Friday morning.
--Written by Shanthi Bharatwaj in New York
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