Dick Bove: Bank of America Faces “Horrific” Loan Losses

Dick Bove has a decidedly mixed track record in predicting bank performance through the financial crisis. For quite some time, Bove has been bullish on Bank of America. So the headlines about his call today got our attention.

“In the second quarter, (Bank of America’s) position as the largest lender in multiple sectors of the American financial system will haunt the company as its losses expand,” Bove said.

Nonetheless, Bove rates the company a buy, and raised his price target to $19 (from $14). He expects the price-earnings multiple on the stock to rise, and thinks confidence in the bank and its management are improving. This reminds us, of course, of our thesis from this weekend: the government’s guarantee against bank failure is driving up stock prices.

Bove said that Countrywide and Merrill Lynch may have been responsible for most of the companies profits in the current quarter. This is a kind of back-handed compliment—Countrywide and Merrill are doing relatively well only because the poor underwriting at BofA has hurt its core business.

Oh, and he says that we shouldn’t expect a TARP repayment anytime soon.

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