Bank of America Needs $36.6 Billion, Oppenheimer Says

Another analyst came out with their "analysis" of bank capital needs. Oppenheimer claims that Bank of America needs $36.6B of new equity. How do they get to this number? Simply saying that BoFA's TCE should be at 6%, or twice the current level, implying ~50% dilution for existing shareholders. You'd think the point of the stress test conducted now by the regulators is to assess future performance of loan portfolios and see how capital ratios that are already in place (aka Tier 1 - this is what UK regulators were looking at when doing stress test for Barclays). For example projected losses in excess of earnings in the stress case are $20B, and with this you get to 8% Tier 1, and we really want you to have 10%. In any case, if you do believe TCE is the way to go, short Wells Fargo (with their 2.3% TCE ratio including mortgage-servicing rights) and long BoFA if you're feeling lucky, or JPM.