(By Mayur Pahilajani - iStockAnalyst Writer)
(Charlotte, N.C.) - Bank of America Corp. (NYSE:BAC) is one of the banking firms that is expected to report quarterly earnings this week ahead of President-elect Barack Obama's inauguration. With the acquisition of Merrill Lynch, which is the U.S.'s largest brokerage firm, Bank of America stands strong.
Some of the market analysts on Wall Street are underestimating the largest U.S. bank by slashing its ratings and earnings per share estimate as the company will not get a chance to rapidly expand into financial services.
The short-term view on the bank's performance may not be positive. But with the digestion of the $2.5 billion mortgage giant Countrywide Financial, the firm is likely to survive the global meltdown in the long-run.
Citigroup Inc. analyst Keith Horowitz reaffirmed its "Buy" rating on the Charlotte, North Carolina-based company as he expects a fourth-quarter loss of 75 cents per share, from its previous expectations of 2 cents per share. He sees a quarterly dividend cut to 5 cents from 32 cents. In October, the firm had halved its dividend.
He anticipates that the company may suffer a $3.6 billion quarterly loss. Horowitz also lowered its net income 2009 guidance from $1.75 per share to 25 cents per share. On average basis, the market analysts have projected Bank of America to post a profit of 21 cents per share in the fourth quarter.
The bank has acknowledged that delinquencies and losses have gone up in all consumer portfolios. In addition, declining home prices are putting pressure on consumers along with increasing unemployment and tight credit conditions.
With a positive long-term view, Horowitz said the company has around $165 million embedded credit losses on its balance sheet, including 33 percent incurred through loan-loss provisions or purchase accounting marks linked to CFC.
Bank of America had reported an unexpected drop of 68 percent in third quarter. The bank, which released its earnings two weeks early, said its net profit declined to $1.18 billion, or 15 cents a share, in the quarter ended September 30, compared to the profit of $3.7 billion, or 82 cents, reported a year ago. The economists had expected net profit to be at $3.22 billion, or 62 cents a share, during the quarter.
Shares of the bank, with $1.3 billion in deposits, continued the downward momentum from yesterday as it was declining by 27 cents or 2.36 percent to $11.16 on the New York Stock Exchange composite trading.
It hit a low of $10.70 earlier in the session, after tumbling by more than 11 percent in the previous session. The stock has traded between $10.01 and $45.08 in the last 52-week period.
