Bank of America (BAC) will need to find more capital following its stress test, says Credit Suisse analyst Moshe Orenbuch. In a report out this morning, Orenbuch says the bank’s capital cushions remain “thin” and that investors should expect further dilution.
Specifically he notes:
Credit quality deterioration and trading losses/write-downs in the investment bank remain the biggest risks to our earnings estimates. Given rising unemployment, continued home price declines, and general macroeconomic headwinds, BAC’s consumer and commercial portfolios remain at risk for meaningfully higher credit losses over 2009-2010. And challenges in the investment bank could further erode profitability, particularly given the increased risk associated with the close of the Merrill Lynch deal.