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Bank of America may need more capital

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Bank of America (NYSE: BAC) CEO Ken Lewis has based what is left of his reputation on the fact that the firm does not need another dime in government money. As a matter of fact, he regrets taking as much TARP cash as he did.

According to Bloomberg, Oppenheimer & Co. believes that "Bank of America Corp., the largest U.S. bank, needs to raise $36.6 billion in equity to bring capital ratios in line with its peers." In this environment, that money is not going to come from the private sector. The only entity with the stones to put it up is the U.S. government.

While the money may not come in exchange for common stock, any instrument is likely to have some conversion provisions, which means that dilution is possible. With a market cap of $44 billion, current Bank of America shareholders will be facing a large haircut if Oppenheimer is right. The stock trades at $7.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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Last updated: November 27, 2009: 10:23 PM

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