A Contrary View
KBW late on Tuesday announced that it was transferring its coverage of Bank of America from Jefferson Harralson and maintaining its "Market Perform" rating on the shares, with a $10 price target, and cutting its 2013 EPS estimate to 95 cents from $1.10, "due to lower expectations in spread income and revenues in global markets." Spread income will certainly not be helped by the Federal Reserve's announcement on Wednesday that it will at least temporarily continue its monthly purchases of $45 billion in long-term Treasury securities and $40 billion in mortgage-backed securities in 2013, while keeping the short-term federal funds rate in a range of zero to 0.25% until the U.S. unemployment rate improves to 6.5%. KBW also established a 2014 EPS estimate of $1.20 for Bank of America, with the estimate increasing to $1.30 for 2015. Despite the neutral assessment, KBW analyst David Konrad said that "we expect core earnings for BAC to improve through 2013," with "continued improvement in US housing, the company's cost-cutting initiatives, and continued benefits from liability management, that may help support spread income during a very challenging interest rate environment."