FBR Capital Remains On Sidelines With Bank of America (BAC), Says Capital Raise Could Still Be Forthcoming

FBR Capital lowered their price target on Bank of America (NYSE: BAC) from $14 to $12 following the announced mortgage security settlement, which they say removes a big overhang. The firm is keeping their Market Perform rating on the stock.

FBR said they remain on the sidelines with the stock until we get a much clearer picture on the company's earnings power.

The firm said without monetizing its China Construction Bank (CCB) stake and freeing up $12B of capital, BAC cannot fill its $20B-$25B Basel III capital hole in our best-case scenario.

They now believe BAC would have been best served if it announced a $10B-$15B capital raise with the settlement. "It would have been dilutive to book value, but the company would have cleared what is now the largest overhang."

However a capital raise is not out of the question. "If some of the litigation claims do not go as well as its optimistic expectations, it may be forced to raise capital at more dilutive levels," the firm states.

For more ratings news on Bank of America click here and for the rating history of Bank of America click here.

Shares of Bank of America closed at $10.82 yesterday.

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