Bank of America stock could sink to $9: analyst

NEW YORK (Reuters) - Bank of America Corp (BAC.N) was rated "underperform" by Friedman, Billings, Ramsey Group Inc analyst Paul Miller in a note, citing the bank's "thin tangible common equity" as a chief concern.

The stock could fall as low as $9, the analyst said. Bank of America's shares closed at $14.1 on Monday, down 5.5 percent. The stock has tumbled 66 percent so far this year.

Bank of America's equity ratio is too low, Miller wrote, leading him to expect that the bank will have to raise a "substantial" amount of capital, diluting existing shareholders.

"We recommend that investors stay away from the stock until this initial raise is complete," Miller wrote in the note.

The Charlotte, North Carolina-based bank, which in July acquired mortgage lender Countrywide and in September agreed to acquire Merrill Lynch MER.N has thin capital, and should cut its quarterly dividend to one cent from 32 cents to conserve its capital, the note said.

Last week, Bank of America said it would cut up to 35,000 jobs over three years, reflecting its pending purchase of Merrill Lynch and weaker business activity.

Bank of America and Merrill Lynch have received a total of $25 billion under the U.S. Treasury Department program to boost banks.

Miller estimates the bank will lose $77 billion, or 8.1 percent of its total loans, in the coming years.

(Reporting by Phil Wahba; Editing by Anshuman Daga)