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BofA Upgraded After Capital Raises

Bank of America shares were relatively flat Tuesday, despite receiving an upgrade from Friedman Billings Ramsey.

Updated from 10:50 a.m. EDT

Bank of America

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shares were relatively flat Tuesday, despite receiving an upgrade from Friedman Billings Ramsey.

FBR analyst Paul Miller raised his rating on the Charlotte, N.C.-based financial institution to market perform from underperform, "given that the first half of its capital plan has been successfully completed" and the stock is trading below his $12 target share price, he writes in a note.

"We see less risk of near-term dilution given the new capital and apparent strong demand for

Bank of America's new shares," Miller writes.

Shares were up fractionally in recent trading, despite the

Dow Jones Industrial Average

soaring more than 200 points.

As a result of the government stress test, BofA is required to raise some $34 billion in fresh capital -- the highest of any large bank.

Wells Fargo

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was required to raise about $13 billion, while


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was told to find $5.5 billion in fresh capital.

JPMorgan Chase

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was not required to raise any new capital.

So far BofA has raised roughly $17.5 billion from the sale of $13.5 billion of common shares and another $4 billion after-tax gain from the sale of shares of China Construction Bank.

Still, Miller remains "cautious" given BofA's "rapidly rising credit losses."

If losses continue to grow at a 25% sequential pace, they could exceed the company's core earnings power (before taxes and provisions), Miller writes.

Further asset sales, share dilution and higher regulation (such as the new credit card regulations signed into law on Friday by President Obama) will all reduce earnings power at BofA, he says.

"We believe

Bank of America must sell significant assets to generate another $6 billion in gains and earn at least $7 billion above the government's pre-provision net revenue estimate. Realizing $6 billion in asset sale gains will be challenging," Miller writes.

The sale of Columbia Asset Management and First Republic Bank -- both of which BofA is rumored to be selling -- is likely worth a combined $4 billion.