For Bank of America stock, it’s lonely on the new-lows list

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This has been a dismal week for financial stocks in general, but Bank of America Corp. shares may be sending a particularly worrisome signal.

BofA stock closed at a new multi-year low Wednesday, falling 76 cents to $34.63. That was 2% below the previous 2008 closing low of $35.31 set on March 10.

For the market as a whole, and especially in the case of financial issues, many investors have been hoping that the March lows marked the worst of the selling brought on by the housing crash and its fallout. To revisit those share prices is to imply that the spring market rally was just a dead-cat bounce. More ominous, it implies that the Federal Reserve hasn’t done enough, after all, to rescue the financial system from its own excesses.

So far, the new-lows list is a lonely place for BofA -- which is a good thing, in the big picture. Shares of Citigroup Inc., arguably the megabank with the scariest problems, ended at $21.06 on Wednesday, still above the closing low of $18.62 on March 17. JPMorgan Chase & Co., at $42.42, was comfortably above its recent low of $36.48 on March 10.

Today most financial shares are modestly higher as the market overall has edged up. BofA was up 6 cents to $34.69 at about 11:30 a.m. PDT.

BofA investors can take some solace from the fact that, even as their shares lose more ground, the stock has fallen less than some of its rivals since the bottom fell out of bank issues beginning in October. BofA is down 32% since Oct. 1, while Citigroup has plunged 56% and Wachovia Corp. has tumbled nearly 50%.

Still, when someone asks where your stock is trading, you’d always prefer not to say, ‘Why, it’s at a new low, thanks!’

What’s dogging BofA? One issue is the extent of the losses the bank may face in its huge consumer loan portfolios, as many Americans’ finances grow shakier in the struggling economy. As Dick Bove, veteran banking analyst at Ladenburg Thalmann & Co. noted in a report this week, BofA management ‘recently indicated that these portfolios were experiencing deteriorating loan quality, and the bank could not project how long or how bad the decline in loan quality would be.’

That shouldn’t be much of a surprise, of course. But BofA will dive much deeper into consumer lending with its planned purchase of mortgage giant Countrywide Financial Corp. BofA obviously thinks it’s getting a deal with the seemingly cheap price it’s paying for Countrywide, even as the firm’s loan delinquencies continue to surge. But Wall Street worries about the cockroach theory: Given the already visible troubles at Countrywide, how many more are behind the walls?

Oppenheimer & Co. analyst Meredith Whitney this week cut her 2008 and 2009 earnings estimates for BofA and four other big banks, citing a ‘continued deterioration’ in consumers’ finances. She now expects BofA to earn $2.50 a share this year, down from a previous estimate of $3. She made an even deeper cut in her 2009 estimate, reducing it to $3 from $3.95.

If Whitney is on target with her 2008 estimate, BofA will earn less than the $2.56-a-share annual dividend it pays on its stock. That’s another issue weighing on the shares: investors’ concern that the dividend will be cut, even though management has said the payout is safe for now. At Wednesday’s closing stock price BofA’s dividend yield was 7.4%, far above the 5.3% average yield of big-bank stocks. It’s a sign investors don’t believe the current payout will be sustained.

Ladenburg’s Bove, for one, believes the dividend is safe. He contends that BofA is getting stronger financially, not weaker. The company has raised nearly $20 billion in fresh capital this year, including $2.7 billion this week via the sale of preferred stock. Then again, the money isn’t coming cheap: BofA will pay 8.2% on the new preferred issue. The capital-raising binge to offset loan losses is supposed to be a confidence-builder, but the action in BofA stock suggests confidence still is in short supply.