December 20, 2011 / 12:47 AM / 7 years ago

Bank of America shares close below $5

(Reuters) - Bank of America Corp (BAC.N) shares closed below $5 on Monday for the first time since March 2009 amid continued concern about its need to build capital.

The stock closed at $4.99, down 4 percent, after dropping as low as $4.92. The shares have not closed below $5 since March 11, 2009.

In recent months, the shares of financial institutions have declined on worries about the global economy and possible exposure to sovereign defaults in Europe.

“It’s more of the same,” said Joe Gordon, managing partner at North Carolina-based Gordon Asset Management, which manages about $525 million for investors. “The news keeps getting more sobering.”

Bank of America, in particular, faces concerns about whether it has enough capital to absorb mortgage-related losses and meet new international standards.

The Federal Reserve is expected to release a proposal this week for how it will oversee the largest U.S. banks, a person familiar with the matter told Reuters. The proposal will include new capital and liquidity requirements.

When the bank’s shares were last below $5 in March 2009, they were on their way up from a financial crisis low of $3.14 earlier in the month. The bank’s shares have fallen about 63 percent in 2011, compared with a 30 percent drop in the KBW Bank Index.

Bank of America now has a market capitalization slightly above $50 billion, making it less valuable than Amgen Inc (AMGN.O) or American Express Co (AXP.N) and only a little more than CVS Caremark Corp (CVS.N).

Investors are worried about steeper capital requirements because that will mean banks will have less capital for loans, said Gary Townsend, chief executive of Maryland-based Hill-Townsend Capital, which invests in financial stocks.

“We have a fragile financial system, especially in Europe and we continue to treat our financial institutions roughly,” he said.

Considering Bank of America’s tangible book value per share is $13, the stock may be oversold and could rebound, Townsend said. But Gordon of Gordon Asset Management said many investors are uncertain about the true value of bank’s assets because of uncertainty about real estate prices.

Despite the fall in the share price, Bob Weisse, director of research at Heritage Financial Services Inc, said he is not selling out of the funds he owns that have large holdings in Bank of America.

Specifically, $15 million of Heritage’s $650 million in assets under management is invested in Bruce Berkowitz’s Fairholme Funds Inc (FAIRX.O) , which has 6.1 percent of its fund in Bank of America, its fifth largest holding.

“It’s an uncomfortable holding in the near term, but I do think looking out five years from now the stock will be much higher,” Weisse said. “It’s just a tough market right now.”

Bruce Berkowitz declined to comment about Bank of America’s stock slide.

Some mutual funds may have charters that restrict holding stocks below $5, but the extent of such charters may not be significant enough to be a huge market factor.

When Bank of America’s shares were struggling in August, Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) purchased $5 billion of the bank’s preferred shares, providing a much needed boost in confidence in the company.

When the investment became public on August 25, the shares jumped more than 9 percent to $7.65. Since then, the stock has mostly sagged. Buffett’s investment also included the right to buy 700 million shares of Bank of America’s common stock at $7.14 per share, but those warrants are currently under water.

Bank of America chief executive officer Brian Moynihan was part of a panel discussion on the economy on Monday in Charlotte, North Carolina, but did not address his bank’s stock price.

In his remarks, he said the bank’s customers have shown “modestly encouraging” signs this month, spending 5 percent more so far in December than in the same period last year. The bank expects U.S. gross domestic product growth in 2012 of 2.1 percent, he said.

Reporting By Rick Rothacker; Additional reporting by Rodrigo Campos and Jessica Toonkel in New York.; Editing by Leslie Adler, Gary Hill and Andre Grenon

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