CS: BoA Facing More Hits on CFC

Bank of America, which releases first quarter earnings shortly, is facing more writedowns on its Countrywide-related mortgage holdings, according to a new report from Credit Suisse.Initiating coverage of BoA with a "neutral" rating, CS analyst Moshe Orenbuch writes that when the bank bought Countrywide Financial Corp. last summer CFC's $92 billion (mostly) residential portfolio was marked down by $14.4 billion or 15.6%. In his new report he says "further headwinds could put losses in excess" of the original marks. The $92 billion includes $33 billion in home equity loans, and $26.4 billion in payment option ARMs, two of the most toxic asset classes out there. Several months after the July 1 deal closed, BoA wrote down the portfolio by an additional $750 million. Citing CFC in particular, Mr. Orenbuch says "Credit quality deterioration is fairly broad-based" at the bank.