Bank of America Corp (BAC)

[maddogs]

Jefferies-how far things have fallen, lol, and inmho, when Jefferies is the guidance, and Citigroup the height of the bar.

Bank of America has said repeatedly that it doesn’t need to sell more stock. But Jefferies believes the markets will likely force Bank of America to raise capital.

“Our traders and desk strategist think the reality is that the market is forcing BAC into a capital raise and the lower stock price goes, the worse it gets,” says Jefferies’ Layla Peruzzi.. “The math they came to to get BAC to Basel I [tier-1 capital] in line with [Citigroup’s (C)] they need about $40-$50bn,” says Jefferies’ Layla Peruzzi in a note.

“They’ve been making some divestitures that have offset this, but CCB stake this morning had them saying they won’t reduce stake below 5% — disappointing to the market place,” Peruzzi said.

BofA has consistently said it does not need a share sale, as it continues to work on selling non-core assets. This morning, China Construction bank Corp. said BofA has pledged to hold at least a 5% stake over the long term.

“We have more than enough capital to run our business and run our strategy,” said BofA spokesman Jerry Dubrowski,

The question raised by Heard on the Street’s David Reilly recently: If BofA needs to raise equity, did the bank waste a chance to do so before the stock hit the skids?

Something has to give soon for BofA. Its shares are trading at a third or so of BofA’s book value. Which means either the markets are dead wrong about BofA, or the markets believe BofA’s assets are overstated or its liabilities understated. It would help if BofA and the other banks could end a logjam with state and federal regulators over a foreclosure settlement.