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UPDATE 2-Bank of America faces Q2 loss, Citigroup says

(Recasts, adds dateline)

NEW YORK, June 25 (Reuters) - Bank of America Corp BAC.N may post a second-quarter loss as it builds reserves to cover losses on credit cards and other consumer loans, Citigroup Inc analyst Keith Horowitz wrote.

The analyst now expects the largest U.S. bank will lose 11 cents per share in the quarter, compared with his prior forecast for a profit of 27 cents per share.

Prior to the change, analysts on average expected profit of 4 cents per share, according to Reuters Estimates.

Horowitz lowered his share price target to $18 per share from $20, and rates the bank “buy.”

A quarterly loss would be the bank’s second in three quarters, and could add to pressure on Bank of America Chief Executive Kenneth Lewis. Since late April, Lewis was stripped of his role as chairman, and has seen the departure of seven of the 19 members of his long-supportive board of directors.

Many shareholders have criticized the Charlotte, North Carolina-based bank’s purchase of Merrill Lynch & Co, and a share price that has fallen nearly two-thirds since the merger was announced last September.

Horowitz said Bank of America may take of $2 billion of writedowns tied to Merrill debt, and also faces an $875 million charge to bolster a Federal Deposit Insurance Corp fund.

These charges, plus credit losses, will more than offset a possible $5 billion gain from selling part of the bank's stake in China Construction Bank Corp 601939.SS, Horowitz said.

The analyst said that while the bank will see more credit deterioration than its peers in the second quarter, the period could be the peak for the bank’s reserve-building.

“We expect Bank of America will emerge from this cycle faster than peers as we expect consumer loan loss provisions to peak in late 2009, while commercial will peak in late 2010,” Horowitz wrote. He added that the bank has “more than adequate capital cushion” to cover credit losses.

On Thursday, Bank of America said it built a capital buffer in excess of the $33.9 billion that regulators demanded after a “stress test” of its ability to weather a deep recession.

The bank has taken $45 billion from the government’s Troubled Asset Relief Program, and has said it would like to begin paying it back this year.

Bank of America shares fell 13 cents to $12.22 in afternoon trading on the New York Stock Exchange. (Reporting by Jonathan Stempel in New York and Archana Shankar in Bangalore; Editing by Jarshad Kakkrakandy and Derek Caney)

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