Will Bank of America Have to Raise Capital?

Jul 19, 2011
J. Webster
Comments Off on Will Bank of America Have to Raise Capital?

The big question for Bank of America is whether or not they have to issue more shares to raise more capital. And that’s the question that seems to have been asked for the last year. Now, after their most recent quarter, it’s still the biggest question. CEO said No, which for many investors means Yes. The stock hit a new 52 week low of $9.40 per share. These new 52 week lows seem to be happening every day this week.

From the WSJ:

Bank of America Chief Executive Brian Moynihan remained adamant Tuesday the bank has no intention or need to raise capital to meet new global standards.

Moynihan went right to the “important” topic in his introductory remarks, saying again, “we don’t need to raise capital” and said its capital, under current standards, was better than expected in the quarter.

Moynihan faced repeated questions from analysts on the bank’s hour-and-a-half conference call about how the bank will push up its Tier 1 Common Equity, the strictest definition of capital, to the globally required 9.5% of risk-weighted assets by the 2019 deadline.

One way Bank of America could avoid having to raise capital is by selling some assets, and that means China Construction Bank, which is worth over $22 billion. Look for that news as a sign the stock might have bottomed out. However, how long have people been saying BAC has hit bottom. Too long. Still, BofA is a huge bank with a lot of potential, if it can just get out from under the mortgage mess from the crisis. That’s a lot to ask and may take many years.

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