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Whitney Sees No BofA ‘Mad Dash’ to Raise Capital: Tom Keene

Bank analyst Meredith Whitney. Photographer: Jin Lee/Bloomberg
Bank analyst Meredith Whitney. Photographer: Jin Lee/Bloomberg

Aug. 24 (Bloomberg) -- Meredith Whitney, the bank analyst who correctly predicted Citigroup Inc.’s dividend cut three years ago, said Bank of America Corp. has no urgent need to raise capital. The shares rose 11 percent.

“I don’t think that there’s a mad dash to raise capital immediately,” Whitney said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “They’re going to steadily raise capital over time.”

Bank of America has lost almost half its value on the New York Stock Exchange this year as investors speculated the Charlotte, North Carolina-based lender will have to access the public markets. The speculation spurred one blogger to write that the company was considering a merger with JPMorgan Chase & Co., talk Bank of America dismissed as “baseless” in an internal memo obtained by Bloomberg News.

Bank of America climbed 69 cents to $6.99 on the New York Stock Exchange at 4:15 p.m., the biggest gain in the Standard & Poor’s 500 Index. The shares, which rose as high as $7.05 earlier today, may triple, according to Anthony Polini, an analyst at Raymond James Financial Inc., who cited the bank’s “excellent” liquidity and flexible balance sheet in a note to clients today. Polini didn’t give a time frame.

Chief Executive Officer Brian T. Moynihan, 51, has said the company won’t need to issue shares to comply with new international capital standards and to settle claims surrounding defective mortgages.

Selling Assets

Moynihan agreed to sell the bank’s Canadian card unit, with $8.6 billion in loan balances, and plans to leave the U.K. and Irish card markets, Bank of America said this month. The bank has been forced to write down credit-card and mortgage units acquired by Moynihan’s predecessor, Kenneth D. Lewis. Bank of America has sold more than 20 assets or units since Moynihan took over last year.

Moynihan is “the right guy for the job,” said Whitney, 41, who started New York-based Meredith Whitney Advisory Group LLC in 2009. Bank of America probably won’t need to raise capital in the public markets, and shareholders should “hold on,” Whitney said.

Bank of America, the biggest U.S. bank by assets, said the speculation it’s considering a merger with JPMorgan doesn’t “make practical sense,” according to the memo. Jerry Dubrowski, a spokesman for Bank of America, confirmed the contents of the memo.

Paying Debt

Richard Bove, an analyst with Rochdale Securities, said yesterday that Bank of America has sufficient capital. The company has “so much cash on its balance sheet that it could pay back all of its short-term debt and a big chunk of its long-term debt,” he said.

Henry Blodget, the former Internet stock analyst turned blogger, wrote yesterday on Business Insider that charges and loan costs may force the bank to raise as much as $200 billion. Bank of America said Blodget, who was banned for life from the securities industry after regulatory inquiries into how analysts touted stocks during the Internet boom, made “exaggerated and unwarranted claims.” The claims are “just wrong,” according to yesterday’s employee memo.

Bank of America is going to focus on cutting expenses to manage through a “protracted economic recovery,” Moynihan told investors this month. The economy grew at a 1.3 percent annual pace in the second quarter.

Moynihan plans to “continue to clean up the mortgage issues” stemming from the 2008 takeover of Countrywide Financial Corp. and “get our operating costs down across the board,” he said this month.

To contact the reporters on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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