April 28 (Bloomberg) -- Bank of America Corp. needs $60 billion to $70 billion of capital, according to Freidman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm.

Bank of America should consider converting its preferred shares to common stock, including $27 billion in private hands “as soon as possible,” Miller wrote in a note to clients today. Miller said his firm’s versions of the stress tests were “somewhat tougher” than those performed by U.S. regulators.

Bank of America is among 19 lenders evaluating results of the formal U.S. stress tests. The Charlotte, North Carolina-based lender sold $45 billion of preferred stock to the Treasury’s bank rescue fund. Chief Executive Officer Kenneth Lewis and directors face opposition from shareholders to their reelection at tomorrow’s annual meeting after a 78 percent drop in the share price in 12 months.

“Most major banks will find it very difficult to raise that kind of capital in today’s environment, and we believe the first line of defense would be to convert both private and TARP preferred to common equity,” Miller said. FBR’s stress test included a 12 percent jobless rate, compared with about 10 percent used by the government test, Miller wrote.

The bank earlier this month reported that first-quarter profit more than tripled on gains from home refinancing. Lewis said he “absolutely” didn’t think the bank needed additional capital.

Lewis has come under fire for not telling shareholders that New York-based Merrill Lynch & Co. had a fourth-quarter loss spiraling toward $15.8 billion before they voted to approve the takeover of the brokerage in December.

Bank of America shares dropped 77 cents, or 8.6 percent, to $8.15 at 4:15 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Linda Shen in New York at

Last Updated: April 28, 2009 16:29 EDT