Bank of America might need to raise $45 billion by 2019 to de-risk its balance sheet, with vulnerability largely in the residential real estate sector, one “Fast Money” analyst said Tuesday.
“The real risk really comes from the overhang we get from Countrywide,” said Marty Mosby, managing director at Guggenheim Securities.
Bank of America acquired Countrywide Financial, the nation’s largest subprime mortgage lender, in 2008.
Mosby said that the largest risk for BAC could include mortgage put-backs and home equity products.
“Those are products that are still here domestically, the ones that have the most potential stress if we were to dip into another recession,” he said.
Mosby said he believed that Bank of America had enough capital to pass stress tests, even the more stringent financial standards laid out by Basel III. But increased guidelines would mean more capital BAC would have to raise, up to $45 billion.
Mosby rated the stock “neutral” and set a price target of $6.50 per share. BAC stock closed at $5.48, down more than 2 percent.
Trader Anthony Scaramucci said he continued to like financials stocks.
“Let’s clear out where we are today, and let’s price them for next year,” he said. “I think these stocks are very, very cheap.”
Scaramucci said investors could expect the Federal Reserve to “flood the market with capital if necessary.”
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Trader disclosure: On Dec. 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Kelly is short CREDIT SUISSE (CDR); Kelly is short UBS (UBS); Kelly is short BARCLAYS (BCS); Kelly is long ISHARES RUSSELL 2000 (IWM); Kelly is long SPYDER S&P REGIONAL BANKING INDEX (KRE); Kelly is long UNITED TECHNOLOGIES (UTX); Murphy is long AK STEEL (AKS); Murphy is long BANK OF AMERICA (BAC); Murphy is long WHIRLPOOL (WHR); Murphy is long ABERCROMBIE (ANF); Najarian has long call spreads in APPLE (AAPL); Najarian has long call spreads in AK STEEL (AKS); Najarian has long call spreads in US STEEL (X); Najarian has long call spreads in PNC FINANCIAL (PNC); Najarian has long call spreads in MICROSOFT (MSFT); Najarian has long call spreads in RIMM; Najarian has long call spreads in CNI; Najarian has long call spreads in CP; Najarian has long call spreads in NSC; Najarian is long CIGX; Najarian is long CBOE; Najarian is long CME; Najarian is long SHLD stock; Najarian is short call spreads in Sears Holdings (SHLD); Scaramucci is personal long BANK OF AMERICA (BAC); Scaramucci is personal long MCDONALDS (MCD); Scaramucci is personal long YUM BRANDS (YUM); Scaramucci is personal long CITIGROUP (C); Scaramucci is personal long GOOGLE (GOOG);
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Bank of America is or was, during the 12-month period preceding the date of the distribution of this report, a client of Guggenheim Securities, LLC. Guggenheim Securities, LLC provided Bank of America non-investment banking securities-related services. Bank of America is or was during the 12-month period preceding the date of the distribution of this report a client of Guggenheim Securities, LLC or its affiliates. Guggenheim Securities, LLC or its affiliates provided Bank of Americanon-securities related services. Guggenheim Securities, LLC or its affiliates received compensation from Bank of America in the past 12 months for products or services other than for investment banking services. Guggenheim Securities, LLC or its affiliates expect(s) to receive or intend(s) to seek compensation for investment banking services from Bank of America in the next 3 months.