BofA (BAC) Shares Plunge 20+% as Fear Spreads; Mayo Cuts to Underperform, Sees Possible Capital Raise
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Price: $38.32 -0.13%
Rating Summary:
19 Buy, 21 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
19 Buy, 21 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
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Shares of Bank of America (NYSE: BAC) have plunged more than 22 percent Monday as traders are speculating on the bank's risks related to S&P's downgrade of the US government late Friday.
BofA shares have not fallen this much in a single trading day since April 20th, 2009, when the stock was around $10 per share.
Adding to downside this afternoon, CLSA's popular banking analyst Mike Mayo downgraded the stock by two notches from Outperform to Underperform in a mid-day research note. Mayo slashed his price target on the stock from $11 to $8.
Mayo believes issues with the AIG (NYSE: AIG) lawsuit may put BofA in a position where it will need to raise capital. More to this point, Mayo argues the market could force a capital raise on BofA if the bank's CDS spreads continue to widen.
The CLSA analyst is concerned a resolution related to the mortgage issue may take much longer than previously expected and cost the bank more than management had anticipated. This could eventually lead to investor worries regarding BofA's ability to achieve regulatory capital requirements in a timely fashion, according to Mayo.
BofA shares last traded at $6.34, down $1.78 from Friday's closing price. Elsewhere in the Big Bank sector this afternoon: Citi (NYSE: C) down 17 percent to $26.67, Morgan Stanley (NYSE: MS) down 13 percent to $17.40, JPMorgan (NYSE: JPM) down 9.3 percent to $34.10, Goldman Sachs (NYSE: GS) down 8.6 percent to $114.40.
BofA shares have not fallen this much in a single trading day since April 20th, 2009, when the stock was around $10 per share.
Adding to downside this afternoon, CLSA's popular banking analyst Mike Mayo downgraded the stock by two notches from Outperform to Underperform in a mid-day research note. Mayo slashed his price target on the stock from $11 to $8.
Mayo believes issues with the AIG (NYSE: AIG) lawsuit may put BofA in a position where it will need to raise capital. More to this point, Mayo argues the market could force a capital raise on BofA if the bank's CDS spreads continue to widen.
The CLSA analyst is concerned a resolution related to the mortgage issue may take much longer than previously expected and cost the bank more than management had anticipated. This could eventually lead to investor worries regarding BofA's ability to achieve regulatory capital requirements in a timely fashion, according to Mayo.
BofA shares last traded at $6.34, down $1.78 from Friday's closing price. Elsewhere in the Big Bank sector this afternoon: Citi (NYSE: C) down 17 percent to $26.67, Morgan Stanley (NYSE: MS) down 13 percent to $17.40, JPMorgan (NYSE: JPM) down 9.3 percent to $34.10, Goldman Sachs (NYSE: GS) down 8.6 percent to $114.40.
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