BoA on Ropes Again: $20 Bn Lifeline Not Enough

by Chris Sturr | February 05, 2009

From Bloomberg:

Bank of America Slides to 1984 Levels on Concern for Capital By David Mildenberg

Feb. 5 (Bloomberg) Bank of America Corp., the nation’s largest bank, declined to its lowest level in New York trading since 1984 on concern the lender doesn’t have enough capital even with a $138 billion U.S. bailout package.

The bank fell 73 cents, or 16 percent, to $3.97 at 10:03 a.m. in New York Stock Exchange composite trading, and earlier declined as much as 20 percent to $3.73, the lowest since October 1984. The stock of the Charlotte, North Carolina-based company has dropped for six straight days and has lost more than two-thirds of its value this year.

The descent follows the U.S. government’s latest infusion of $20 billion in new capital and a plan to share losses on $118 billion in mortgages, corporate loans and derivatives. The U.S. previously committed $25 billion to the bank and Merrill Lynch & Co., acquired earlier this year. Bank of America lost $1.79 billion in the fourth quarter, its first deficit since 1991, as more borrowers defaulted on loans.

“Washington is dithering while the banking stocks are going to zero,” said Nancy Bush, an independent bank analyst in Annandale, New Jersey. Trading is being driven by speculation that the government may take over Bank of America and other lenders as part of a plan to bolster the nation’s financial system, she said.

Scott Silvestri, a spokesman for the bank, wasn’t immediately available for comment.

“There is this lurking shadow of nationalization which haunts the banks, but particularly Bank of America,” said David Dietze, president of Point View Financial Services Inc. in Summit, New Jersey, in an interview late yesterday. “It’s pretty spooky.”

Bank of America’s risk rose after it acquired Countrywide Financial Corp., the largest U.S. home lender, and Merrill Lynch, the world’s largest brokerage, he said. Merrill lost $15.3 billion in the fourth quarter.

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