Are big bank stocks about to hit new lows?

Filed under: Analyst reports, Citigroup Inc. (C), Bank of America (BAC), Wells Fargo (WFC), Stocks to Sell

HSBC (NYSE: HBC) may have to raise $14 billion due to more losses from mortgage-related securities and other credit instruments. Friedman, Billings, Ramsey Group has cut Bank of America (NYSE: BAC) to Underperform and set a new price target of $9. According to Reuters, Friedman said Bank of America's equity ratio is so low that the bank will have to raise a "substantial" amount of capital, diluting existing shareholders.

Since BAC trades at $14 and has a 52-week low of $9, the new target is shocking. But it may be a reasonable assumption about all big banks. They may be headed toward new multi-year lows even after cash injections from the Treasury.

Most analysts see banks posting further large losses for the fourth quarter and few expect a recovery in early 2009 as housing prices continue to drop, corporate lending and underwriting dry up, and consumer credit defaults rise. At $7.40, Citigroup (NYSE: C) trades at about twice its low, but a really bad quarter could change that. The same holds true for Wells Fargo (NYSE: WFC), which several stock analysts say will have to raise more money. It trades at $26, not far from its 52-week low of $19.89.

Two months ago, owning bank stocks looked like a very good way to make some quick money. Now, it is time to dump them.

Douglas A. McIntyre is an editor at 247wallst.com.

Are big bank stocks about to hit new lows? originally appeared on BloggingStocks on Tue, 16 Dec 2008 09:09:00 EST. Please see our terms for use of feeds.

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