Brokerages cut earning estimates on BofA

Brokerages cut earning estimates on BofA

Stock Market Predictions

(Global Markets) - JMP Securities said Bank of America Corp has the capital levels to absorb $100 billion in mortgage losses without technically needing to raise capital, but practical considerations could force the issue at half that loss amount.

Though the largest U.S. bank by assets currently has a pro-forma $37 billion capital cushion under the Basel III framework, mounting mortgage losses could transcend earnings and cut into the capital buffer, leading the bank issue stock and dilute shareholders, JMP Securities analysts David Trone said.

"As we saw in 2008 and 2009, financial firms will often be forced to raise capital well before the technical benchmarks are breached," Trone wrote in a note.

"We suspect the company would raise (capital) even at $50 billion, or half the projected loss levels in our 'reverse engineer/stress test' analysis."

JMP said the newly issued warrants to Berkshire Hathaway Inc imply a modest share dilution, cutting its 2011 operating EPS estimate by a cent to $0.95 and 2012 operating EPS by 7 cents to $1.42.

It maintained its "market perform" rating on the stock.

In August, Warren Buffet said he will invest $5 billion in the bank.

Separately, Guggenheim Partners also cut its earnings estimates and lowered its price target by a dollar to $10 on the bank's stock to reflect the market's current lack of appetite for risk and the overhang which is directly related to the bank's acquisition of CountryWide.

The brokerage lowered its 2011 estimated EPS by 3 cents to a loss of 17 cents and estimated 2012 EPS by 4 cents to $1.33, while maintaining its "buy" rating on the stock.

Shares of Bank of America were trading down 2 percent at $7.07 in early trade on Friday on the New York Stock Exchange. The stock has lost nearly 50 percent of its value since January.

(Reporting by Tanya Agrawal in Bangalore; Editing by Joyjeet Das)

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Mannkind up on FDA nod for diabetes device trials

Mannkind up on FDA nod for diabetes device trials

Stock Market Predictions

(Global Markets) - Shares of MannKind Corp (MNKD.O) rose as much as 33 percent on Friday, a day after the company said U.S. regulators cleared the design of two clinical studies to test the efficacy and safety of its experimental device, Afrezza, to treat diabetes.

In January, the U.S. Food and Drug Administration rejected the inhaler and asked the company for two more trials to prove that a second-generation version of the device, known as the Dreamboat, is equivalent to a first-generation inhaler known as MedTone.

The FDA confirmed protocols for two studies in which the device will be tested on patients with type 1 and type 2 diabetes.

"We are especially encouraged by the regulatory progress of the Type 2 trial, which we believe now enables approval with a label to address a broader, earlier stage disease, patient population than we had previously anticipated," JMP Securities analysts said in a note to client.

JMP upgraded Mannkind's stock to "market outperform" and set a price target of $7.

Afrezza is administered at the start of a meal and dissolves immediately upon inhalation to deliver insulin to the blood stream.

The trials, called Study 171 and Study 174, will assess the effectiveness of Afrezza in bringing down glucose level in blood compared with MedTone. Mannkind had earlier said that they do not expect the trials to be completed by 2012.

"Ultimately this could be an excess of a billion dollar drug, but how quickly it gets to the market is a real question. It is not going to be in the market for two years," CRT Capital Group analyst Liah Hartman told Global Markets.

The company might be able to complete trials by the late fourth quarter of 2012 or first quarter of 2013, analyst Hartman added.

However, there are concerns over the company raising enough capital to fund the trials.

"It is very possible that they could partner globally for these trials ... Chief Executive Alfred Mann could personally increase the size of unsecured credit which he has been providing the company lately," Hartman said.

Shares of the Valencia, California-based company were up 23 percent at $2.91 on Friday on Nasdaq. They closed at $2.37 on Thursday on Nasdaq.

(Reporting by Kavyanjali Kaushik in Bangalore; Editing by Saumyadeb Chakrabarty, Roshni Menon)

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