Goldman Sachs also downgraded 19 other banks today, but their revised outlook on Bank of America is what really stings.
That’s because the market is buzzing with rumours about Bank of America, and Goldman’s negative view might signal that the firm believes that Brian Moynihan is unable or limited in his ability to quash the concerns, now and in the future.
Even though Moynihan recently appeared on CNBC and on a much-criticised 90-minute conference call with shareholders and hedge fund manager Bruce Berkowitz in order to quash the rumours (and he tried hard — Moynihan said essentially that those people who think we’re in trouble, I’ll see you in court if that’s what it takes) , Goldman cites those market rumours — that BofA has too little capital — as one of the main reasons it’s downgrading Bank of America.
“The market remains concerned over its Basel III capital position…which has been a major contributor to its stock falling over 25% to $7 over the past two weeks.”
According to The Street, Goldman analysts argue that confidence in Bank of America’s ability to reach its Basel III target by the fourth quarter of 2012 has declined due to objections to a proposed $8.5 billion settlement over mortgage backed securities (MBS), sovereign debt issues, increased MBS lawsuits and macro concerns.
The firm says it’s dropping BAC’s price target by 23% to $10 from $13. Goldman also lowered 2012 estimates by 17% while lowering 2013 estimates by 18%, according to the Street.
Of course Goldman and nearly every other financial aren’t doing too well either. Goldman’s share price dropped 10% yesterday.
And just look at how much the personal fortunes of the U.S. financial CEOs have dropped >