Can you imagine being a Citigroup banking sector analyst? Every time you speak about the doom of banks, do you think “I wonder how long I still be employed?”
Today Citi analyst Keith Horowitz wrote a note to clients doubling his fourth-quarter mark-to market loss estimate on Bank of America to $3 billion and said that the bank will need to raise more capital in two to five years. (It would need it earlier but TARP will hold off the need for private capital for a bit longer.
Part of the problem is that Bank of America has probably already written down 33% of the credit losses embedded on its balance sheet. The lads at FT Alphaville quote from the note:
With $55 bil of charges taken so far, we estimate Bank of America is 33% through the cycle. By looking at cumulative losses and comparing them to charges taken, we can estimate how far along we are into this cycle. Based on our estimates, BAC has $165 billion of embedded credit losses on its balance sheet, of which it has taken about 33% of the hit either through the loan loss provision or the purchase accounting marks related to CFC.
As FT Alphaville point out: Mr. Pot, meet Mr. Kettle.