Banking analyst Stuart Plesser at Standard & Poor’s says he is still betting on Bank of America, even though the firm’s shares have lost 10 percent of their value in the past week. He explained his outlook for the company.
“Bank of America certainly has its risks compared to some of the other large banks, but at the current price levels, it has a tangible book value of $12,” Plesser told CNBC.
“There are some positives—in the third quarter, the sequential charge-offs were up, but at a lower rate than the second quarter. So credit is bad, but improving.”
Plesser has a “strong buy”recommendation on BofA and has a 12-month target price of $22. He also said the company has enough funds to withstand any further losses.
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“BofA has adequate capital right now to go on, without paying the TARP, and they will likely earn it and be able to pay it back though 2010,” he said.
“I don’t think they need to raise $45 billion [to repay the TARP] right now—they have about $150 billion in liquidity currently standing to go against future charge-offs, and to raise another $45 billion wouldn’t seem the right move by the management right now.”
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“I would point to the provision line for Bank of America as the most important item. And when that stabilizes, one could certainly start to look at normalized earnings of Bank of America at current prices and see the kind of upside that this stock could have once they return to those levels.”
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Plesser does not own shares of Bank of America.