The news for Bank of America has been pretty bleak lately, with mortgage woes weighing hard on the bank and its share price dropping by about 15 percent this year.
Star bank analyst Richard Bove of Rochdale Securities sees more pain ahead. “It is now believed that BAC will lose an additional $32 billion in the next three years related to the housing crisis,” he writes in a commentary obtained by Business Insider.
“Approximately, $9 billion of this money will be derived from its reserve. The remaining $23 billion will be charged to earnings at the rate of $2 billion per quarter for the next three years.”
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Dick Bove
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That means the bank will probably have to dump more assets, Bove says. “The biggest risk in the securities portfolio appears to come from government-backed securities,” he says. “The losses BAC is about to take related to housing are historic in proportion.”
The good news for BofA shareholders: the woes already are priced into the stock, Bove says.
So while he’s bearish on banks stocks for the short-term due to economic weakness, he’s bullish on BofA shares for the long term.
BofA, the country’s largest bank by assets, sees itself in much better financial shape than Bove does. Its CEO Brian Moynihan adamantly denied BofA has any need to raise more capital at a conference Wednesday, according to Dow Jones.
Editor's Note: Bill Spetrino, editor of The Dividend Machine, is also bullish on Bank of America. Watch this exclusive video that explains how Spetrino used his strategy to make himself and investors millions. Click Here Now.
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