Housing losses continue to mount at Bank of America Corp. And with some experts projecting prolonged weakness home prices, the near future doesn't look bright for the firm.
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Analysts at Sanford C. Bernstein are projecting
$27 billion of housing-related losses between now and 2013 for Bank of America. That’s in addition to the $46 billion the company has already recorded.
About 44 percent of Bank of America’s total lending is linked to housing, compared with 34 percent at its competitors, so further struggles in the housing market will hurt the firm disproportionately.
And according to Yale economist Robert Schiller
, we may see a 10 percent to 25 percent further decline in home prices before we begin a slow recovery.
"My gut feeling is we might see a continuation of the decline" in home prices, Shiller said last week at a Standard & Poor's housing summit.
As for when home prices might bottom, Shiller said that was unclear and it was possible prices could slide for 20 years.
"We've seen five years of decline already since the peak in 2006 and I don't see evidence that we're coming out of it," Shiller said. Home prices had been supported last spring by a tax credit, but the housing market has struggled since the credit expired.
As long as Bank of America’s housing related losses don’t exceed $55 billion, twice Bernstein’s estimate, it should manage to boost Tier 1 capital to 8.5 percent by 2013 and avoid raising more, the Sanford Bernstein analysts said.
While the troubles at Bank of America continue, at least one analyst expects the company to be broken up.
“Bank of America is too big to manage at this point,” said Paul Miller, a bank analyst at FBR Capital Markets. “It’s not going to happen tomorrow, it’s not going to happen next year, but at some point down the road I think Bank of America will be broken up.”