Bank of America: When Will It Hit $10: Poll

NEW YORK ( TheStreet) -- Bank of America ( BAC)'s stock price has had a tremendous run of late.

Since bottoming at $4.92 in December, the shares are up 33% through Thursday's close.

No question there is a lot to be bullish about. The stock trades at just a fraction of book value, so even allowing that a rival like Wells Fargo ( WFC) runs circles around it, you're paying roughly one third the price.

The bank still has a trillion dollars in deposits. In a normal environment--let's say a 6% 10-year bond and a 3% fed funds rate -- Bank of America can make super safe loans at 7% interest while paying just 3% for the privilege. When you've got a trillion dollars in deposits, that's a lot of free money. And don't forget all the annoying fees it brings in on top of that. Even if the bank decided to be super nice and cut those fees in half--tons more free money flowing into the operation.

Then take something like its U.S. credit card operation. Every credit or debit card transaction involving a Bank of America-branded card--Bank of America takes a nice cut. On credit cards, its 2%.

Bank of America still has a world class investment banking and brokerage operation following its acquisition of Merrill Lynch in 2008. And it remains one of the four biggest lenders in the U.S., so it can still use its balance sheet to get in on a large corporate merger, leading to advisory and underwriting fees.

So you're worried about mortgage exposure? And well you should be. Countrywide, which Bank of America acquired in 2008, was probably the single-most aggressive mortgage lender during the boom years. Even if they hadn't played fast and loose with the rules, that would be bad news. Think of all those cookie--cutter houses sitting out there in the California desert, in Arizona, in Florida. Bank of America owns an awful lot of them.

But did Angelo Mozilo and the gang at Countrywide play fast and loose with the rules? You bet they did. Bank of America has already paid out or set aside $35 billion to deal with the legal fallout, according to Citigroup analyst Keith Horowitz.

Horowitz thinks it will take another $12 billion to deal with the issue. That would be no sweat for Bank of America, as it could easily handle that with the money it earns. Even if it takes another $32 billion to deal with the problem, Horowitz thinks that when you take earnings and the amount of time it will take to sort through all the legal issues, Bank of America can handle it.

So why does the market still say Bank of America's earnings is worth absolutely nothing? Why do investors say the bank is worth even less as a going concern than it would be if it was chopped up and sold piece by piece?

Well, remember what we said about the normal environment? We aren't in one. Bank of America can't charge 7% to make good loans while borrowing at 3%. It can only charge 3%, and it can't find many good loans to make. Those credit card fees? Under attack from a massive antitrust lawsuit. And that $32 billion worst case mortgage situation? Well, it isn't really the worst case. Not if New York Attorney General Eric Schneiderman, newly appointed to a high profile task force unveiled by President Obama during his State of the Union speech, has anything to say about it.

But what do you have to say? Can Bank of America ride the recent wave of bullishness all the way to $10 before year-end?

When Will Bank of America Shares Reach $10

2012
2013
2014
Never

-- Written by Dan Freed in New York. Follow this writer on Twitter.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.