Jan. 20 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender by assets, dropped 29 percent on concern the company needs at least $80 billion to restore capital to adequate levels.

Tangible common equity “is just too low in our opinion, particularly for a company with questionable near-term profitability and credit costs,” said Friedman, Billings, Ramsey Group Inc. analystPaul Miller in a report to clients today. Miller cut his price target on the Charlotte, North Carolina- based company to $5 a share.

Bank of America got a second round of help from the U.S. government last week after posting its first loss since 1991. The fourth-quarter loss of $1.79 billion didn’t include the $15.3 billion deficit at Merrill Lynch & Co., the brokerage acquired this month. The U.S. package for the bank, designed to keep the financial crisis from getting deeper, included a $20 billion investment and a $118 billion asset guarantee.

“The market is saying Bank of America should have pulled out of the deal,” Stifel Nicolaus analyst Christopher Mutascio said in a telephone interview. “It doesn’t appear that the backstop provided by the government really covers their risk.”

The bank’s stock fell $2.08 to $5.10 at 4:15 p.m. in New York Stock Exchange composite trading, and dropped as low as $5.05. The stock has lost 86 percent of its value in the past 12 months. Bank of America cut its dividend last week to 1 cent a share from 32 cents.

The U.S. government’s $49 billion in preferred shares equals about 35 percent of Bank of America’s tangible equity, Mutascio said in a report today that cut the bank’s rating to “hold” from “buy.”

The government’s stake brings likely political pressure on the bank “to do things that may not be in the best interests of its common shareholders,” Mutascio wrote. Repurchasing the preferred shares from the U.S. at the current price would dilute earnings in 2010 at least 32 percent, he wrote.

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To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: January 20, 2009 17:01 EST