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Posted by Stacy-Marie Ishmael on Jan 12 20:18
FT Alphaville

Citigroup’s Keith Horowitz, knocked 11 per cent off Bank of America’s shares with his forecast of a $3.6bn fourth-quarter loss (or 75 cents a share), a mark to market loss of $3bn, and a dividend cut to 5 cents a share from 32 cents.

Previously, Horowitz was expecting a profit of 2 cents a share, while the consensus is for a Q4 profit of 21 cents a share.

But here’s the kicker:

With $55 bil of charges taken so far, we estimate Bank of America is 33% through the cycle. By looking at cumulative losses and comparing them to charges taken, we can estimate how far along we are into this cycle. Based on our estimates, BAC has $165 billion of embedded credit losses on its balance sheet, of which it has taken about 33% of the hit either through the loan loss provision or the purchase accounting marks related to CFC.