Bove: Bank of America is solventAugust 23, 2011: 12:25 PM ET
BoA stock continues to fall, but Dick Bove says that some of the fears driving its descent are unwarranted.
Bank analyst Dick Bove has been making the cable TV rounds, trying to tamp down on the Bank of America (BAC) panic. Specifically, he argued that the troubled company has enough money to cover potential losses related to its mortgage portfolio, and that its falling share price should not necessitate a new capital raise. Here is what he told Bloomberg TV:
"There is no impact whatsoever on Bank of America's balance sheet, based upon the price of its stock in the open market. If the price of the stock goes to a penny a share, it has no impact on the balance sheet of Bank of America. Bank of America sells the stock to the public, it takes in the money, and that is the end of the transaction as far as Bank of America is concerned. If you're going to break a bank, you're going to have a run on its deposits. That's not happening. Exactly the opposite is happening…Deposits are pouring into Bank of America."
"Or, as in the case of the fourth quarter of 2008, you've got to bust a bank by making it repay all of its short-term debt immediately. Bank of America has so much cash on its balance sheet that it can pay back all of its short- term debt, it could pay back a big chunk of its long-term debt and still have excess cash on the balance sheet. You can't break the bank by driving the price of the stock lower, particularly if the bank is as cash-rich as this one is with deposits pouring in as fast as they are."
Here is a related video from Fox Business News: