(Fixes typo in headline)
Jan 12 (Reuters) - Citigroup reversed its fourth-quarter profit view on Bank of America (BAC.N) to a loss and said the company may slash its quarterly dividend by 84 percent, adding that the bank was also likely to raise capital in the next few years.
“One of the main concerns investors have with bank stocks is fear that the banks will be forced to raise equity capital that will lead to significant dilution to common shareholders,” analyst Keith Horowitz wrote in a note to clients.
Horowitz doubled his fourth-quarter mark-to market loss estimate on the nation’s largest bank by assets to $3 billion and said while U.S. Treasury funds would prevent the bank from being forced to raise cash in the near term, it will ultimately need to do so in two to five years.
“We continue to believe the TARP injection of capital as well as other government actions act as a very powerful stabilizer for the banks, and that it can provide a ‘bridge’ through a challenging 2009 and 2010,” the analyst said.
Horowitz expects Bank of America to post a fourth-quarter loss of 75 cents a share, down from his prior profit view of 2 cents a share.
The analyst expects the Charlotte, North Carolina-based bank to cut its quarterly dividend to 5 cents a share from 32 cents.
However, Horowitz kept his “buy” rating, citing excellent long-term value in the stock, and retained a price target of $22.
Shares of the company were trading down a percent at $12.82 before the bell. The stock had closed at $12.99 on Friday on the New York Stock Exchange. (Reporting by Mihir Dalal in Bangalore; Editing by Himani Sarkar)