Bank of America likely to win Lehman: analyst Bove

By Tenzin Pema

BANGALORE (Reuters) - Bank of America Corp, the largest U.S. bank by market value, will likely win the auction for Lehman Brothers Holdings Inc, said Ladenburg Thalmann & Co analyst Richard Bove on Friday, a day after Lehman was forced into talks to sell the whole company.

Analyst Matthew Albrecht at Standard and Poor's Equity Research, referring to an unconfirmed report that Lehman was in talks with a variety of potential acquirers, said he expects "...a deal could be consummated over the weekend."

Shares of Lehman fell as much as 16 percent to $3.55 in morning trade Friday on concerns that the company may not be able to arrange a U.S. government-backed takeover.

On Thursday, sources said Lehman and U.S. officials were in intensive discussions about a number of options, including a complete sale of the company, as questions over the survival of the Wall Street investment bank mounted.

"I believe that Bank of America will win the auction for Lehman... There is a natural fit between the two companies," analyst Bove said, as various reports suggested Bank of America or British bank Barclays Plc could be suitors for Lehman.

Bove, who according to Thomson Reuters data is the top ranked analyst in the accuracy of his estimates for Lehman, was one of the first banking analysts to recommend selling financial stocks as credit market problems began.

In July last year, he correctly predicted the booming growth of the financial system could not be sustained by economic growth.

On Friday, Bove said if a Bank of America-Lehman deal was done it would be a major plus for Bank of America.

"If the deal is done for stock it adds to Bank of America's equity," Bove wrote in a note to clients.

Lehman needs Bank of America to lower its borrowing costs and to portfolio its commercial real estate loans, Bove said.

In addition, Lehman would meaningfully increase its fixed income business if it was linked to the country's largest credit card and mortgage company, Bove added. He also noted that if a deal was done, Bank of America would get access to one of the best fixed income trading desks in the country, become a "first rank player" in the equity investment banking sector, and also get Neuberger Berman, Lehman's asset management business.

"It (Bank of America) gains a top quality retail sales operation. It improves its standing in all types of research... It gains five years in its pursuit to be the nation's number one underwriter," Bove said.

S&P Equity's Albrecht agreed. Lehman offers a potential acquirer valuable trading, advice and asset-management operations, Albrecht said.

However, any acquirer for Lehman would have to have sufficient capital to absorb potential real estate-related losses, Albrecht added.

Shares of Lehman plunged more than 40 percent on Thursday, cutting its market value to under $3 billion and prompting intensive talks with U.S. officials about rescue options for the company.