Goldman Sachs Says BofA's (BAC) Buffett Investment Was More About Confidence, Says Company Can Absorb $40B of Losses
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Price: $61.88 +0.03%
Rating Summary:
26 Buy, 18 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
26 Buy, 18 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Goldman Sachs commented on Bank of America (NYSE: BAC) following yesterday's news that Warren Buffett's Berkshire Hathaway will invest in $5 billion in the comapny.
The firm said the investment was "less about building capital and more about instilling confidence in BAC's stock."
Goldman said while this should improve sentiment, key overhands remain including servicing settlement, concerns over its put-back settlement and mortgage litigation risk, and macro uncertainty. "While sizing these can prove to be challenging, the market appears to be pricing in an overly adverse outcome or a massively dilutive capital raise, neither of which we believe will happen."
Even if losses come out on the high end of expectations, the firm believes BofA can absorb $40 billion of losses over the next few quarters and still have a 6% Basel III capital ratio at 4Q12.
The firm reiterated their Buy rating and $10 price target. They revised 2011 and 2012 EPS estimates from ($0.25) and $1.25, respectively, to ($0.26) and $1.20.
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 $7.65 yesterday.
The firm said the investment was "less about building capital and more about instilling confidence in BAC's stock."
Goldman said while this should improve sentiment, key overhands remain including servicing settlement, concerns over its put-back settlement and mortgage litigation risk, and macro uncertainty. "While sizing these can prove to be challenging, the market appears to be pricing in an overly adverse outcome or a massively dilutive capital raise, neither of which we believe will happen."
Even if losses come out on the high end of expectations, the firm believes BofA can absorb $40 billion of losses over the next few quarters and still have a 6% Basel III capital ratio at 4Q12.
The firm reiterated their Buy rating and $10 price target. They revised 2011 and 2012 EPS estimates from ($0.25) and $1.25, respectively, to ($0.26) and $1.20.
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 $7.65 yesterday.
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