Bank of America (NYSE:BAC) EPS Lowered on FRE, FNM Agreement

Bank of America (NYSE:BAC) had its EPS estimate for the fourth quarter of 2010 lowered on the $3 billion provision the bank agreed to with FRE and FNM.

Barclays said, "We expect BAC to report 4Q10 EPS of $0.16
versus our prior $0.26 estimate and the $0.24 consensus. The
reduction to our 4Q EPS estimate reflects the $3 billion($2.4B more than we had forecasted) mortgage repurchase provision BAC expects to book in 4Q10. This provision relates to its late December agreement reached with FNM and FRE to resolve repurchase claims on certain residential mortgage loans sold by CFC. The higher than forecasted provision more than offsets our newly included gains of $1 billion or so that we estimate on its November sales of its BLK stake and its share of CCB's $9.2 billion rights offer.

"We expect it to point to an ongoing improvement in credit trends with reserve reductions continuing over the next few quarters. It should guide to a net interest margin contraction in 1H11 before flattening out in 2H11, as long-term debt is targeted for a 15-20% reduction by the end of 2011."

Barclays maintains an 'Equalweight' rating on Bank of America, which closed Tuesday at $14.69, up $0.29, or 2.01 percent. Barclays has a price target of $19 on the giant financial institution.