NEW YORK (
Bank of America
's sale of $5 billion in preferred shares to
earned praise from several analysts shortly after its announcement.
Shares were up some 15% early Thursday.
"The injection of $5 billion from Buffett should dampen the heightened volatility in recent trading of BAC stock and its CDS, and we think it is a clear vote of confidence for the stability of Bank of America's franchise," wrote Nomura analyst Glenn Schorr in a report published Thursday morning.
Still, Schorr left his "neutral" rating on Bank of America, noting he prefers
Standard & Poor's equity analyst Erik Oja upgraded Bank of America to "buy" from "hold" following the deal's announcement, arguing it "should alleviate capital adequacy concerns," though Oja writes that he remains "cautious," about the bank's exposure to
repurchase requests from mortgage bond investors.
Wells Fargo analyst Matt Burnell also offered cautious praise for the investment, arguing it "substantially reduces the potential for a secondary offering of
Bank of America common shares, and also reduces the need for
the bank to aggressively divest other assets," such as its stake in
China Construction Bank
Burnell also believes the investment by Berkshire "provides independent confirmation of the longer-term opportunities" for Bank of America, while signaling "a vote of confidence" in management and its strategy.
However Burnell notes that because the preferred shares are cumulative -- dividend payments continue to add up even if they are suspended -- they do not add to BofA's regulatory capital requirement .
Not all analysts loved the deal, however. Rochdale Securities'
Written by Dan Freed in New York
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