Bank of America’s actions continue to betray its words. CEO Brian Moynihan bravely maintained in an investor conference call last week that the beleaguered bank would be around for the next 230 years and did not need more new capital. He nixed selling equity at its current price levels, because it would be highly dilutive.
Yet we and others have raised the issue that the bank is in a corner in dealing with its not so hot balance sheet. Not only are equity sales an alternative the bank desperately wants to avoid, but the other route back to health, earning its way out, looks constrained. Bank expert Chris Whalen forecasts reduced profits for major banks. And the industry seems to see that coming too. A Financial Times story yesterday reported that top global banks were making serious headcount cuts based on their expectation of earnings pressure.
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