Buffett Takes BofA Capital Increase Fears 'Off the Table': Shareholder
After a $5 billion capital infusion in Bank of America by Warren Buffett, Anthony Polini bank analyst Raymond James reiterated a “strong buy” on the company that was previously “being viewed as one of the weakest banks in the country, if not the world,” he said on CNBC on Thursday.
The fears moving Bank of America "down to the depths" of the previous recession have been exaggerated, he said.
Polini noted that the bank was not undercapitalized in an appearance on CNBC on Wednesday, which later provoked criticism of the "strong buy" he's kept on the stock since October 13, 2008.
Polini is sticking with a price target of $16 for the stock ahead of a forthcoming foreclosure settlement. Bank of America “can already absorb a $20 billion settlement without an additional nickel,” he said.
Shares closed Wednesday at $6.99, and while they rose in morning trading, they were still below the $9.81 level they were trading at in the beginning of August.
Meanwhile, Jeffery Harte, a managing director of equity research with Sandler O’Neill, said he finds it “hard to think that BAC shouldn’t be a $12 stock if you start looking purely at the fundamentals. It just may not be there tomorrow.”
The key is to “focus on the market psychology impact of this move” said Harte, because the mortgage issues remain and "there's still a tough operating environment."
Jonathan Finger, a Bank of America shareholder, said the Buffet investment took the fears of necessary capital increase "off the table."
"We think the stock still has a good ways to run in terms of returning to intrinsic value," said Finger. A stock price of "$11 is an intermediate target that investors can focus on," even taking into account a $30 billion loss mortgage loss.
Finger said that a double dip is "somewhat factored into the stock," and those concerns account for part of the drag in the financials sector.
UBS removed Bank of America from its “least preferred” list in a research note out Thursday, that retracts the stock's addition to the list just a day earlier.
“The investment from Berkshire is likely to restore confidence in BAC shares, which was a key component of our expectation for the stock to remain weak,” said the report.
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