Does Bank Of America (BAC) Need $10 Billion In New Capital?

Banking, finance, and taxes

Published: July 1, 2008 2:43 pm

KBW, the bank research firms, thinks Bank of America (BAC) will have to raise $10 billion in new capital. Its mix of real estate, LBO, business, and consumer credit debt still faces substantial write-downs.

The figure is part of a report from KBW that says American money center and regional banks will have to come up with $30 billion to make their balance sheets right. According to the AP, "Among the banks reviewed by KBW, 10 are large-capitalization banks that would account for $21 billion in capital necessary to cover potential losses."

For BAC, which is already trading poorly in the market due to general malaise in the bank industry and its ill-advised purchase of Countrywide (CFC), the dilution from raising $10 billion would be close to 15%.

That could take its stock from $23, near a 52-week low, to $18. And, that is if there is no other bad news.

Douglas A. McIntyre

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