Remember Citi (C)? The bank that once did stuff like investment banking and research, sales and trading, and some other things, and was a little more than just a zombifying and rapidly decaying ward of the state? Neither do we. For a vivid example of how things have changed, Citi today's added BAC stock to its "top picks live" list... and nobody gave a rat's ass. In fact the action in financial stocks was driven more by Dick Bove's earlier downgrade of some regional banks, dragging down such "opportunity" firms as Bank of America with them. Yet Citi knows a thing or two about a thing or two, specifically that BofA, once it is done with all the assorted litigation facing its soon to be ex-CEO, and any potential legal dangers over that other orange guy they got for a steal when they acquired Countrywide, will need to raise capital, especially if its star traders want to be paid for churning the bejeezus out of stocks like Citi, CIT, FNM and FRE (and maybe BAC itself). The amount of the offering will have to be at least $45,000,000,000.99, in order to pay back the $45 billion of government TARP aid still on the books, and the token $0.99 for General Corporate Purposes.
Which is why Keith Horowitz, CFA has decided to take matters into his own hands, sending out the following note to clients "Selloff in BAC Creates Opportunity – Adding to Top Picks Live." Judging by the stock reaction, Mr. Horowitz must have triggered quite a few spam filters.
From the Citi report:
Pay Czar leading to concerns about accelerate TARP repayment — With recent press about compensation curbs, there is heightened concern that BAC will want to accelerate repayment of TARP to defend its capital markets business (this is less of an issue for regionals with more traditional bank business mixes), which is leading to fears of a capital raise. Given the ongoing CEO search, fear of a capital raise only adds to the uncertainty hitting the stock, which creates a very attractive entry point. It is important to differentiate that this capital raise would be viewed as offensive since it would be BAC making decision to repay TARP early, as opposed to defensive capital raises in past.
One imagines this is more a "down the road" issue than anything. Mr. Lewis will have his hands full for quite a while to worry about what his successor will get paid, especially if Mr. Bove continues providing much more "less than instantaneous" reporting on the financial industry.
