Meredith Whitney, the bank analyst who correctly predicted Citigroup Inc.’s dividend cut three years ago, said Bank of America Corp. has no urgent need to raise capital.
“I don’t think that there’s a mad dash to raise capital immediately,” Whitney said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “They’re going to steadily raise capital over time.”
Bank of America has lost more than half its value on the New York Stock Exchange this year as investors speculated the bank will have to access the public markets for capital. Chief Executive Officer Brian T. Moynihan, 51, has said repeatedly that the company won’t need to issue shares to comply with new international capital standards and to settle claims surrounding defective mortgages. Bank of America has sold more than 20 assets or units since Moynihan took over last year.
Moynihan is “the right guy for the job,” said Whitney, 41, who started New York-based Meredith Whitney Advisory Group LLC in 2009. Bank of America, based in Charlotte, North Carolina, probably won’t need to raise capital in the public markets, and shareholders should “hold on,” Whitney said.
Bank of America rose 3.3 percent to $6.51 on the New York Stock Exchange at 9:34 a.m., the biggest gain on the 24-company KBW Bank Index.
Moynihan agreed to sell the bank’s Canadian card unit, with $8.6 billion in loan balances, and plans to leave the U.K. and Irish card markets, Bank of America said this month. The bank has been forced to write down credit-card and mortgage units acquired by Moynihan’s predecessor, Kenneth D. Lewis.
“They’re biting into the marrow of the institution to raise capital,” Whitney said. “They’re selling some crown jewels.”
Richard Bove, an analyst with Rochdale Securities, said yesterday that Bank of America has sufficient capital. The company has “so much cash on its balance sheet that it could pay back all of its short-term debt and a big chunk of its long- term debt,” he said.
Henry Blodget, the former Internet stock analyst turned blogger, wrote yesterday on Business Insider that charges and loan costs may force the bank to raise as much as $200 billion. Bank of America said Blodget, who was banned for life from the securities industry after regulatory inquiries into how analysts touted stocks during the Internet boom, made “exaggerated and unwarranted claims.”
Bank of America is going to focus on cutting expenses to manage through a “protracted economic recovery,” Moynihan told investors this month. The economy grew at a 1.3 percent annual pace in the second quarter.
Moynihan plans to “continue to clean up the mortgage issues” stemming from the 2008 takeover of Countrywide Financial Corp. and “get our operating costs down across the board,” he said this month.
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