Citigroup slashes Bank of America's estimates and target

(Reuters) - Citigroup slashed its fourth-quarter and 2009 estimates on Bank of America Corp (BAC.N) citing heavy mark to market losses, reserve build in its credit card and residential mortgage segments, and corporate lending at its global corporate and investment banking group.

The brokerage also reduced it share price target by 42 percent to $22 to reflect the lower estimates and a higher equity risk premium in an "uncertain" environment.

"We still believe Bank of America offers the best value among the large cap banks, but our 'buy' rating is clearly more of a valuation call as our estimates remain well below consensus and we see relatively high risk of a dividend cut," analyst Keith Horowitz said in a note to clients.

Horowitz now expects the company to post a fourth-quarter profit of 2 cents a share, compared with his earlier estimate of 42 cents a share.

For 2009, the analyst now expects Bank of America to earn $1.75 a share, down from previously estimated $2.25 a share.

Bank of America's reserve build for bad loans for the fourth quarter is expected to be $2.7 billion, compared with $2.1 billion in the last quarter, Horowitz said.

Bank of America, the No. 3 U.S. bank by assets, has loaded up on mortgages as the world's largest economy wrestles with the worst housing market since the Great Depression.

The Charlotte, North Carolina-based bank further heightened its exposure to home loans by acquiring Countrywide Financial Corp, the largest U.S. independent mortgage lender and agreeing to buy Merrill Lynch & Co MER.N, which owns the world's largest retail brokerage.

Analyst Horowitz expects mark to market losses of $1.5 billion for the fourth quarter at Bank of America, provided market conditions do not improve, and $3.6 billion at Merrill.

Shares of the company were up about 2 percent at $13.08 in morning trade Tuesday on the New York Stock Exchange.

(Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier)