Shares of Bank of America Corp. soared Wednesday after two prominent banking analysts said that the beleaguered company is under no immediate pressure to raise capital to cover potential loan losses.
In an interview with Bloomberg Television on Tuesday, Richard Bove, an analyst at Rochdale Securities, refuted claims by blogger Henry Blodget that B of A would need to raise as much as $200 million, arguing that the bank "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."
Analyst Meredith Whitney echoed Bove in an interview with Bloomberg radio on Wednesday, saying that while B of A may need to raise capital eventually, it would likely do so gradually.
"I don't think that there's a mad dash to raise capital immediately,"Whitney said.
B of A's shares have lost more than half their value in recent months and fell to a 52-week low Tuesday, but Bove's and Whitney's comments gave the stock a boost Wednesday. In heavy trading, the stock closed at $6.99, up 11% from a day earlier.
Amid claims that it is running low on capital and may even need to sell itself to another megabank, B of A may also have aided its own cause by enlisting employees to help quell the rumors.
According to Dow Jones, the bank has circulated an internal memo, written as talking points, in which says that it has raised roughly $30 billion selling off assets over the last 20 months or so and that its current capital level is double what is required by regulators.
In the memo, it also said that rumors it was in merger talks with JPMorgan Chase & Co. were "baseless and don't even make practical sense."
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