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June 15 (Reuters) - Bank of America Corp (BAC.N) is experiencing “horrific” loan losses and may set aside $46 billion in loan loss provisions this year, analyst Richard Bove said, even as he raised his target on the stock by $5 to $19.
Shares of the largest U.S. bank slid 3 percent to $13.31 in early morning trading on the New York Stock Exchange.
“In the second quarter, (Bank of America’s) position as the largest lender in multiple sectors of the American financial system will haunt the company as its losses expand,” the Rochdale Securities analyst said.
However, Bove said he expects the price-earnings multiple on the stock to rise as confidence in the company and its management improved.
He continues to rate the stock “buy.”
Bove said it was becoming increasingly clear that Bank of America’s acquisition of Countrywide and Merrill Lynch has been good for the company.
These two businesses may have provided the bulk of the company’s positive results in the current quarter as the core business continues to suffer due to its poor underwriting practices, he said.
Bank of America, which has taken $45 billion from the U.S. government’s Troubled Asset Relief Program, has indicated it would like to begin repaying its infusion this year.
But Bove said he saw no TARP redemption yet.
Regulators last month ordered Bank of America to raise $33.9 billion of capital as a buffer against a deep recession. Bank of America has said it has raised nearly all of that sum.
“It is now being conceded, by even the most bearish observers, that claims that the industry was insolvent were incorrect and, therefore, banking will survive and possibly thrive,” Bove said in a note to clients.
Calls for the resignation of Bank of America Chief Executive Kenneth Lewis — who was stripped of his role as chairman in April after a surge in credit losses and the takeover of Merrill Lynch — may now begin to subside as the company’s stock continues to move higher, Bove said.
Removing Lewis would be a “terrible mistake,” he added.
Lewis has said he would like to remain chief executive perhaps until 2012. (Reporting by Santosh Nadgir and Tenzin Pema in Bangalore; Editing by Himani Sarkar)