RPT-UPDATE 2-Morgan Stanley cuts BofA, says banks need capital

jueves 10 de julio de 2008 18:45 CEST

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BANGALORE, July 10 (Reuters) - Morgan Stanley cut its rating on Bank of America Corp (BAC.N: Cotización), and lowered its 2008 earnings view for large-cap U.S. banks saying the banks may have to raise additional $51 billion in capital and record further loan losses.

Analyst Betsy Graseck downgraded Bank of America to "underweight" from "equal weight" and said the nation's largest retail bank may have to raise $12 billion in capital and cut dividend by 20 percent in order to meet credit losses.

The addition of Countrywide Financial will increase losses for Bank of America, the analyst said in a note to clients.

On July 1, Bank of America completed the acquisition of Countrywide, the largest U.S. mortgage lender which helped fuel a housing boom that went bust when its risky sub-prime loans to borrowers began to fail, for about $4 billion in stock.

Graseck, who also expects Citigroup (C.N: Cotización) to slash its dividend by 20 percent and raise $11 billion in capital in the fourth-quarter, said the credit crisis was "far from over".

The investment bank has a "cautious" rating on the large-cap banks. Fall in housing prices will lead to losses on residential mortgage loans, while slowing consumer spending will impact commercial loans, Morgan Stanley said.