Citigroup Issues Cautious Comments on Bank of America (BAC), But Sees Long-Term Value
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Citigroup issued some cautious comments on Bank of America Corp (NYSE: BAC) this morning, saying investors should be braced for a very challenging 4Q. The firm cut Q4 EPS estimates, expects the company to cut the quarterly dividend, and expects a negative outlook.
Citigroup lowered its Q4 EPS estimate to a loss of $0.75 from a loss of $0.02 and the consensus of a $0.21 gain.
Citigroup expects the company cut the quarterly dividend from $0.32 to $0.05.
For 2009, the company cut its EPS estimates by $1.50 to $0.25. This compares to the consensus of $1.75 and current low on the Street of $1.20.
Citi also said it expects the company will likely have to raise fresh capital, although they say the company can wait for a better environment. They see a capital raise 2-5 years out via a mix of equity and preferred.
On credit, Citi thinks BAC is in the 3rd inning. The firm sees cumulative losses of $165 billion for 2008-2011. They said so far about 33% has been taken.
Citi expects TCE to bottom in the 2.25-2.5% range, but then quickly rebuild.
All this being said, the firm continues to rate Bank of America a 'Buy', saying they see excellent long term value in the stock.
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