Paulson Bets Bank of America Will Almost Double by End of 2011

By Saijel Kishan

Nov. 18 (Bloomberg) -- Paulson & Co., the hedge fund firm run by billionaire John Paulson, told investors Bank of America Corp.’s stock will almost double in the next two years as writedowns ease.

Bank of America, ranked first by assets and deposits in the U.S., may rise to $29.81 by December 2011, Paulson said in a quarterly letter to clients. A copy was obtained by Bloomberg News. Bank of America closed yesterday at $15.77 on the New York Stock Exchange.

“Banks will have passed the current writedown cycle and have visibility for growth in 2012,” the letter said. Bank of America dropped to $2.53 in February amid concern that the U.S. might seize banks that ran short on capital. While the bank “has risen from when we purchased the stock, we believe considerable upside remains,” the letter said.

Paulson reversed course this year by investing in Bank of America, ranked among the nation’s biggest home lenders. Last year, wagers by his New York-based firm against the U.S. housing market helped earn an estimated $2.5 billion. Charlotte, North Carolina-based Bank of America represents Paulson’s biggest holding among financial companies, the letter said. Earlier this month, he disclosed a stake in Citigroup Inc.

Paulson, who manages about $29 billion, started a hedge fund last year called Paulson Recovery to invest in financial companies hurt by mortgage writedowns. His firm held 160 million shares of Bank of America at the end of the third quarter valued at $2.7 billion, according to regulatory filings.

Armel Leslie, a spokesman for New York-based Paulson, declined to comment on the holdings.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net.