Bank of America (NYSE:BAC) Worth Three Times What it is Today if Broken Up Says Richard Bove

Rochdale Securities analyst Richard Bove took a look at Bank of America (NYSE:BAC) if they were to be broken up, and suggests if that scenario were to unfold, it would be worth about $53 a share, about three times what it stands at today.

Bove wrote that “A series of smaller companies would outperform the conglomerate in every respect. They would have more focused management teams and, in some cases, far more attractive secular outlooks than the parent. The businesses with attractive outlooks would have the opportunity of attaining multiples the conglomerate will never reach.” Attaining multiples refers to price-to-earnings.

This isn’t the first take by Bove on what would result from the major banks being broken up, as he did the same with J.P. Morgan (NYSE:JPM) recently, and believed it would about double in their case.

Now this isn’t anything new, as far as a company being worth more when dismantled than when it stands as a whole, as that’s been understood for some time. What Bove is getting at it seems, is this could definitely become a reality in the regulatory climate we’re in, and we could end up seeing smaller banks if politicians have the will to go through with it. That is a big “if” though, and one that is surely being battled over behind the scenes at this time.

In what is sure to make that even more of a possibility is the recent reports that the big banks, and other banks as well, have been under-reporting the debt they’re incurring to invest in securities. If the banks take another hit and politicians are left looking like wimps and fools, the end of big banks in America could very well be over.

As far as the value of these banks if they were broken up, others believe Bove is actually conservative in his estimates and they would be far more valuable than he’s saying.

What was interesting about Bove’s breaking down of Bank of America was the strength of some of the units in the company, which include the credit card business and capital markets unit, both of which were estimated to trade at ten times earnings if they stood alone.

Although I would really be surprised if the giant banks are broken up, it is interesting that the idea is being thrown around as a serious possibility.

But even that doesn’t seem to deter the banks from continuing on in destructive and unethical practices, which if they again flounder, will come back to haunt them. It’s like they’re addicted and can’t break the habit. Maybe breaking them up will break their habits. We’ll see.