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May 26 (Reuters) - Friedman Billings Ramsey upgraded Bank of America Corp (BAC.N) to "market perform" from "underperform" citing successful completion of the first half of the bank's capital plan.
"We see less risk of near-term dilution given the new capital and apparent strong demand for Bank of America's new shares," Friedman said in a note to clients.
On May 19, Bank of America raised $13.47 billion through a share sale, marking a major step toward meeting the U.S. government's requirements for capital-raising following the recent "stress testing" of the bank.
Including proceeds from the sale of part of its stake in China Construction Bank Corp (601939.SS) for $7.3 billion, the bank is now more than half-way toward plugging a $33.9 billion capital shortfall identified by the government.
Friedman, however, said it was very cautious on the bank in the longer term due to rapidly rising credit losses.
If losses continue to grow at a 25 percent sequential pace, they could exceed the company's "core" pre-provision, pretax earnings power within a few quarters, Friedman said.
Asset sales, dilution and higher regulation could all reduce Bank of America's "normalized" earnings power, said Friedman, which reiterated its $12 price target on the stock.
Shares of Bank of America closed at $11.07 Friday on the New York Stock Exchange. (Reporting by Ramya Dilip in Bangalore; Editing by Himani Sarkar)