Sandler Says Believe in B of A

Bank of America — the nation's second largest mortgage lender — has had the crap kicked out of it lately. It posted a large third quarter loss, its share price has been hammered, and bond investors are trying to collect damages because Countrywide (which the bank bought 27 months ago) allegedly did a poor job as a master servicer. Also, it has been slammed by the foreclosure scandal. But a new research note from Sandler O'Neill says the company's stock is a "buy." Sandler writes that the bank's mortgage foreclosure process is "fundamentally sound." It also says: "We expect substantial putback related losses, but likely only a fraction of what we believe is reflected in BAC's current share price. We estimate that BAC could have $10B of gross reps & warranties related put-back losses over the next few years. This represents $5.7B net related losses after adjusting for $4.4B of reserves. While $10B is a large number, it is less than half of the $27B in losses implied by BAC's recent share price declines"…