Financial Winners and Losers: BofA

Bank of America shares were rising Wednesday after the bank said it has moved closer to amassing a government-mandated capital cushion.

Author:: Robert Holmes
Publish date:: May 27, 2009 4:20 PM EDT

Updated from 2:38 p.m. EDT

Bank of America

(BAC) - Get Report

was among the many decliners in the financial sector Wednesday after the bank said it has raised 76% of the total capital buffer required by the government's stress tests.

BofA said it has raised almost $26 billion in its capital plan since the results of the stress tests were announced earlier this month. The bank said it is well on its way to reaching the $33.9 billion buffer set by the

Federal Reserve

Last week, BofA said it raised $13.5 billion through issuing 1.25 billion shares in a common stock offering. It has also sold part of its stake in

China Construction Bank

, and it has entered into agreements with certain holders of non-government perpetual preferred shares to exchange their holdings of approximately $5.9 billion of preferred stock into approximately 436 million shares of common stock.

Subject to market conditions, BofA said it could issue up to an additional 564 million common shares through the exchange of non-government perpetual preferred shares for common stock.

Rochdale Securities analyst Richard Bove cut his earnings estimates for BofA Wednesday, saying that shares "may perform poorly near‐term as the company continues to sell shares, but longer term it continues to be very attractive."

Bove cut his 2009 earnings estimate for BofA to 74 cents a share, down from $1.08 a share. He also reduced his 2010 estimate to $1.79 a share from $1.87 a share, and his 2011 estimate to $3.10 a share from $3.30 a share. Bove added that the estimate of loan losses has also been increased to reflect poorer underwriting results in the commercial real estate and commercial and industrial loan sectors.

Meanwhile, both BofA and

Citigroup

are expected to soon raise base salaries for investment bankers to compensate for limits on annual bonuses, according to a report in

The Wall Street Journal

that cited people familiar with the matter.

The move would be similar to one

Morgan Stanley

(MS) - Get Report

made last week, where it

raised the base salaries of most of its officers and top-earning employees

Elsewhere, banks are lobbying the Federal Deposit Insurance Corp. for permission to bid on the same assets that the banks would put up for sale as part of the government's Public Private Investment Program. Banks contend that allowing them to buy toxic assets would give them added incentive to sell assets at low prices, even at a loss. It also would free up capital by moving the assets off balance sheets, spurring more lending, they argued.

BofA shares gave back 0.6% to close at $10.91. Citigroup slipped 1.9% to $3.70. Among other bank stocks,

JPMorgan Chase

(JPM) - Get Report

was 5.2% lower at $34.66, and

Wells Fargo

(WFC) - Get Report

shed 6.1% to $24.08.

In other bank news,

PNC Financial Services

(PNC) - Get Report

said Wednesday it raised more than $600 million through a sale of 15 million shares of common stock.

PNC said it plans to pay back the $7.6 billion it took from the Troubled Asset Relief Program, or TARP "as soon as appropriate," adding that it has no plans to convert preferred shares issued under the Treasury Department's Capital Purchase Program. PNC finished down 5% to $41.11.

Meanwhile,

KeyCorp

(KEY) - Get Report

said in a filing with the

Securities and Exchange Commission

that it will exchange common shares for up to $1.74 billion in trust preferred securities, a move several other banks have employed following the release of the government's stress tests.

KeyCorp, which must increase its capital levels by $1.8 billion to satisfy the findings of the government's stress tests, said on May 11 it would sell up to $750 million of its common shares. Shares fell 8.5% to end the day at $4.76.

Among analysts actions, Credit Suisse upped earnings estimates for

Goldman Sachs

(GS) - Get Report

for the second quarter and full year. The firm said second quarter-to-date business trends appear very similar to that of the first quarter. Credit Suisse said it now expects a second-quarter profit of $3.70 a share, up from the previous estimate of $1.66 a share.

Credit Suisse now expects Goldman Sachs to report full-year 2009 earnings of $13 a share and 2010 earnings of $14.75 a share. Both estimates are well ahead of the average analyst target, according to Thomson Reuters. The firm also increased its stock price target to $160 from $140. Goldman shares closed down 1.4% at $140.01.

Elsewhere, Deutsche Bank upgraded

Regions Financial

(RF) - Get Report

to buy from hold and reiterated its stock price target of $5. Deutsche claimed the recent selloff in Regions' shares is overdone given the firm's view that the drag from recent capital actions should be mostly behind the bank. Deutsche said it doesn't expect any meaningful negative surprises in the near term for Regions. Shares rose 3.4% to close at $3.96.