Looking to Bank of America for bank valuations

October 27, 2009 | By Jim Kim

We've noted that analysts have a lot to deal with when it comes to estimating bank earnings. There's a whole of lot of accounting minutiae to deal with in addition to operations. So the average official estimates have come to mean less and less. But TheStreet.com argues that the decision on whether Bank of America (BAC) should be able to start repaying TARP funds might be very helpful.

"Regulators' decision on Bank of America will standardize some of those metrics once again, at least for banks that are still under the auspices of the Troubled Asset Relief Program." This is akin to the stress tests back in May, which shed a bit of light on top banks. If it is decided that Bank of America can repay TARP funds without raising new equity, which seems unlikely, "it will indicate that its capital metrics--7.25 percent Tier 1 common equity, 12.46 percent Tier 1 capital, 8.39 percent Tier 1 leverage, and 4.82 percent TCE--are adequate. If it's required to raise more money first, the amount of new capital can be factored into those metrics to imply regulatory standards." The latter strikes many as more likely.

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- here's the article