Bank of America's earnings fall 68 percent

More on this Story

Story | Dow closes at 4-year low as crisis mood sweeps the world
Story | Car loan approvals were off sharply in California this year
Story | October 2008 - In pricey Greenwich, Conn., signs of a troubled economy
Story | Bank of America chief: half of banks won't exist in 5 years
Story | Healthy banks smell money in the water
Story | FDIC moved when Wachovia faced a 'silent' run on deposits
Story | Poll: Despite turmoil, voters think bank accounts are safe
Story | Small, locally owned banks say customers are flowing in
Story | More car dealerships going out of business
Story | Job losses signal that U.S. is in recession
Story | BofA to give former head of Merrill Lynch a major role
Story | Economy keeps Central Florida voters still undecided
Story | Ripple effect of credit crunch: 'everything's on hold'
Story | Bailout bill not likely to help on foreclosures, experts say
On the Web | Fallout on Main Street 2008: See the full project
On the Web | Complete McClatchy election coverage
On the Web | The Economy in Turmoil

Christina Rexrode | Charlotte Observer

Even the stalwarts stumble, as evidenced by Bank of America's third-quarter earnings, which were announced Monday, two weeks ahead of schedule.

The Charlotte bank's earnings fell a precipitous 68 percent, to $1.18 billion, driven largely by its July 1 purchase of Countrywide Financial Corp., a California mortgage lender known for nontraditional loans. Over the weekend, Countrywide agreed to settle lawsuits with 11 states by providing $8.4 billion to modify loans for homeowners.

Bank of America also announced two initiatives to shore up capital. The bank intends to raise $10 billion on the markets, which can dilute the value of current shareholders, and will cut its shareholder dividend payout for the first time in years, from 64 cents per share to 32 cents.

Still, Bank of America is faring better than many peers that have been losing money this year, and it has acted to bring Countrywide's lending standards in line with its more conservative rules.

Chief executive Ken Lewis acknowledged that investors will be disappointed in the dividend reduction. "It is not a decision we made lightly, Lewis said. However, we cannot pay out what we have not earned. Our goal is to resume dividend increases from the new level as soon as our earnings performance warrants.

Lewis added that these are the most difficult times for financial institutions that I have experienced in my 39 years in banking.

"Both economic and financial market conditions have changed significantly in the last two months, he said, explaining why the company is raising capital.

The bank's retail deposits and investment banking income were up, which Bank of America attributed to consumers' flight to safety, implying that customers are nervous about keeping their money in some other financial institutions.

However, the bank took losses on several areas that are affecting most financial institutions, including rising credit-card delinquencies and buying back auction-rate securities. The bank wrote down $320 billion on its shares of Fannie Mae and Freddie Mac, the troubled mortgage lenders taken over by the government last month.

Read the complete story at charlotteobserver.com

Stay Connected