Bank of America jumps 15% on hopes for housing

Tuesday, April 14, 2009 at 12:43am
David Mildenberg, Bloomberg News

Bank of America Corp., the largest U.S. bank, surged 15 percent and topped $10 per share for the first time in three months on reduced concern of an expanded government role and expectations of higher profits from home loans.

Bank of America gained $1.47 to $11.02 in New York Stock Exchange trading after reaching as high as $11.12. The shares last closed above $10 on Jan. 14, and declined as low as $2.53 on Feb. 20 on speculation that the U.S. might take a controlling stake.

“Fears of nationalization got pretty far to the extreme, though it is still a valid concern,” said Blake Howells, an analyst at Becker Capital Management, which oversees $1.6 billion in Portland, Ore. “As long as you owe the government money, they are going to want to have a voice and it’s not always going to be a reasonable voice.”

Bank of America received $45 billion through the government’s bank-rescue program and secured $118 billion in loan guarantees to absorb potential losses from its purchase of Merrill Lynch & Co. Chief Executive Officer Kenneth Lewis has said the bank is likely to rebound from a $1.79 billion fourth- quarter deficit that marked the Charlotte-based lender’s first loss in 17 years.

The KBW Bank Index of 24 large U.S. lenders gained 7.8 percent, following a 20 percent increase on April 9 after Wells Fargo & Co. reported a record first-quarter profit. Wells Fargo is the second-biggest U.S. home lender behind Bank of America.

Increased Countrywide lending providing boost

Bank of America is benefiting from increased lending at its Countrywide Financial Corp. unit, acquired in July, Howells said. The bank is scheduled to report its first-quarter earnings on April 20.

U.S. banks including Fifth Third Bancorp., Huntington Bancshares Inc. and Citigroup Inc. rallied more than 20 percent today, while SunTrust Banks Inc., Keycorp and Regions Financial Corp. gained more than 10 percent.

The Proshares Ultrashort Financials exchange-traded fund, used by investors who expect declining bank share prices, declined 7.6 percent to $59.92 at 4:15 p.m., its lowest level since it began in February 2007.