Notable Calls

UBS is out somewhat negative on Bank of America (NYSE:BAC) noting that they recently lowered target prices for many of our bank stocks (with BAC one of the few left unchanged). The lowering of BAC target price to $15.50 from $29 today reflects: 1) Firm's outlook for tighter credit availability, which will likely lead to higher credit losses for banks in general in 09 (incl at BAC); 2) Greater uncertainty over the near-term prospects of the MER deal—reflecting both concern over further writedowns at MER and downside bias to MER’s EPS power; and 3) risk of additional writedowns at BAC given recent widening of credit spreads (even after yesterday’s tightening)

Lower credit availability likely to lead to higher losses in 2009

In BAC's view, credit availability will likely remain tight into 2009 as banks focus on maintaining sufficient capital and liquidity levels given the current difficult operating environment. This will likely put further pressure on both consumers and commercial borrowers, leading to higher credit losses in 2009.

Concern over lower earnings power at combined BAC/MER

They think there is risk to MER’s earnings power given continued pressure on MER’s capital markets related businesses. Also, we think further writedowns at both MER and BAC are possible given recent widening of credit spreads.

$15 price target assumes 1.1x pro forma BAC/MER tangible common book per share estimate of $13.25

Notablecalls: Would have been all over this one 3 months ago. Today...not sure. So you know it's out there. Could very well be the Street low tgt for BAC.