October 9, 2008 / 11:43 AM / 10 years ago

UPDATE 1-Baird upgrades Bank of America to outperform

(Recasts; adds details, background, share movement)

Oct 9 (Reuters) - Robert W. Baird upgraded Bank of America Corp (BAC.N) to “outperform” from “neutral,” saying the largest U.S. bank’s long-term earnings power remains strong and the recent capital raise and dividend cut should help mitigate the need for future capital issuance.

However, the brokerage cut its 2008 and 2009 earnings estimate for Bank of America to incorporate the dilution from its recent stock offering.

Earlier this week, Bank of America, which has agreed to buy investment bank Merrill Lynch & Co Inc MER.N, reported a steeper-than-expected 68 percent fall in quarterly profit, cut its dividend in half and said it planned to raise $9.76 billion in cash.

“We believe recent weakness in the stock was overdone, and has provided an attractive entry point,” analyst David George wrote in a note to clients. The bank, whose stock has shed 42 percent over the past five days, will continue to benefit from the turmoil in the retail banking market, as evidenced by the more than $20 billion in new deposit flows in the third quarter, the analyst said.

“We expect Bank of America to emerge as a market share winner through the cycle, and should continue to benefit from a “flight to quality” in the retail deposit market given the challenges of many of its competitors,” George said.

Shares of Bank of America were trading at $22.75 before the bell. They closed at $22.10 Wednesday on the New York Stock Exchange. (Reporting by Anurag Kotoky in Bangalore; Editing by Deepak Kannan)

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