The clock is ticking for Bank of America to raise $3 billion in new equity, but the bank says no sweat.
The Charlotte Business Journal notes that the biggest U.S. Bank by assets is working under a deadline tied to last December’s repayment of bailout loans. Under its agreement with Treasury, Bank of America has till June 30 to reach agreements that will bring in $3 billion in new equity. It has the balance of 2010 to actually get its hands on the cash.
Analysts have been keeping an eye on the company’s wheeling and dealing. BofA announced this month, for instance, that it is selling its stake in Santander Serfin of Mexico for $2.5 billion.
That sounds like a big chunk of cash, but BofA needs to raise equity, not just bring in proceeds. Analysts at Morgan Stanley estimate the Santander transaction will put around $100 million in equity in BofA’s pocket by eliminating the need to hold capital against Serfin loans.
Last month, BofA agreed to sell its stake in Brazil’s biggest bank by market value, Itau, raising what Morgan Stanley estimates at $1 billion in capital.
This leaves a gap of almost $2 billion, but Morgan Stanley says filling it shouldn’t be a problem. The firm, which rates BofA stock buy, says the bank could sell the financial data business it acquired in its 2009 purchase of Merrill Lynch, or negotiate an early release from restrictions that prevent it from selling its stake in China Construction Bank before next summer.
BofA likewise is not expressing much concern. A spokesman says the Charlotte, N.C., bank is “on pace” to raise the required funds by year-end.
This suggests that there are no blockbuster asset sale announcements in the offing, though BofA steers the discussion away from such rank speculation.
“We have made significant progress, and we’re focusing on closing transactions by Dec. 31,” the spokesman offers.