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Jan 29 (Reuters) - Punk Ziegel analyst Richard Bove reduced his earnings estimates on Bank of America (BAC.N), saying the economic turmoil and the bank’s historically poor underwriting record has cost the company one year of incremental earnings growth.
Bove lowered his 2008 earnings-per-share estimate to $3.96 from $4.45, 2009 estimate to $4.45 from $4.98 and 2010 estimate to $5.07 from $5.59 on the second-largest U.S. bank.
Last week, Charlotte, North Carolina-based Bank of America reported a 95 percent decline in fourth-quarter earnings hurt by losses tied to write-downs, poor trading decisions and mounting credit woes.
“Its trading losses simply reflect incompetence in risk management,” Bove said. Bank of America’s fourth-quarter results reflected $5.44 billion of trading losses, compared with a year-earlier profit of $460 million.
However, when viewed on the basis of deposits, spreads, and control of expenses which are intermittently interrupted by cycles, there is no better bank in the country than Bank of America, Bove wrote.
With average deposits growth of more than 8 percent per year since 1997, Bove said Bank of America has a very powerful driver for increasing earnings. Bove has a “buy” rating on Bank of America.
Deterrents preventing this growth from equating to pretax income growth in any period are loan losses, high expenses, and problems in non-interest income, Bove added in a note to clients. (Reporting by Nivedita Gupta in Bangalore; Editing by Bernard Orr)