S&P cuts Bank of America to sell from hold

By Riley McDermid

NEW YORK (MarketWatch) -- Standard & Poor's Equity Research on Friday downgraded shares of Bank of America Corp. (BAC:bank of america corporation com to sell from hold amid worries about the mortgage portfolio the bank will inherit when it acquires lender Countrywide Financial Corp. (CFC:Countrywide Financial Corp).

"We take unfavorable note of the large Countrywide option-adjustable rate mortgage portfolio that Bank of America will inherit, since we believe this portfolio has yet to be stress tested," S&P said in its action. The agency also said it expects BofA to "significantly" increase its loss provisions to reflect a weakening U.S. consumer and predicted a dividend cut. S&P cut earnings estimates for 2008 for the bank by 51 cents to $2.16 and reduced its target price by $9 to $24.

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