Citigroup Slashes Estimates and Price Target on Bank of America (BAC)
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Analysts continue to slash estimates on bank stocks. Today it was Bank of America's (NYSE: BAC) turn. Citigroup lowered its estimates and price target on Bank of America due to marks and higher credit costs.
The firm lowered their Q4 EPS estimates by $0.40 to $0.02 per share (consensus is $0.41). The firm lowered the Q4 estimates to reflect $1.5 billion in mark-to-market losses, $2.7 billion of reserve additions for credit card, residential mortgage/home equity and corporate lending in the GCIB.
Citi also cut '09 EPS estimates on Bank of America by $0.50 to $1.75 (consensus is $2.56) and cut 2010 EPS estimates by $0.75 to $3.35.
Citi cut their price target on Bank of America from $38 to $22, which is still well above the market price of $12.85. The firm is keeping their Buy rating on Bank of America, on a valuation call. The firm still believes Bank of America offers the best value among the large cap banks.
Citi still sees high risk of a dividend cut, buy said this is already reflected in the stock price which is currently trading at a 10% dividend yield.
Citi said credit card portfolio losses remain a headwind in 2009 and have raised their card losses to 9% in 2009, which is above the management guidance of a 7% loss rate.
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