Analyst Bove: BoA Likely to Win Lehman

(Reuters) – Bank of America Corp. will likely win the auction for Lehman Brothers Holdings Inc, said analyst Richard Bove, after sources said Lehman and U.S. officials were in intensive discussions about a number of options, including a complete sale of the company.

“I believe that Bank of America will win the auction for Lehman Brothers. There is a natural fit between the two companies,” the Ladenburg Thalmann analyst said, as various reports suggested Bank of America or Barclays could be suitors for Lehman.

“If the deal is done for stock it adds to Bank of America’s equity. This deal would be a major plus if the bank wins it,” Bove wrote in a note to clients.

Lehman needs Bank of America to lower its borrowing costs and to portfolio its commercial real estate loans, Bove said.

In addition, Lehman would meaningfully increase its fixed income business if it was linked to the country’s largest credit card and mortgage company, Bove added. He also noted that if a deal was done, Bank of America would get access to one of the best fixed income trading desks in the country, as well as become a “first rank player” in the equity investment banking sector.

“It (Bank of America) gains Neuberger Berman. It gains a top quality retail sales operation. It improves its standing in all types of research… It gains five years in its pursuit to be the nation’s number one underwriter,” Bove said. The analyst maintained his “buy” rating on Bank of America’s stock.

However, he slightly lowered his 2008 earnings estimates for Bank of America to $2.35 per share from $2.51.

Shares of Bank of America closed at $33.06 Thursday on the New York Stock Exchange, while those of Lehman plunged more than 40 percent on Thursday, forcing the company into talks about a possible sale.

Lehman shares closed at $4.22 Thursday.

(Reporting by Tenzin Pema in Bangalore; Editing by Jarshad Kakkrakandy)