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Bank of America raises $10bn as earnings slump

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Date: Tuesday 07 Oct 2008

LONDON (ShareCast) - Bank of America is to raise $10bn in new equity and halve its dividend to preserve cash after third quarter earnings dived.

“These are the most difficult times for financial institutions that I have experienced in my 39 years of banking,” chief executive Ken Lewis said.

BoA, which recently bought investment bank Merrill Lynch and mortgage lender Countrywide Financial, saw third quarter earnings of $1.$1.18bn, or 15c a share, down 68% from a year ago.

The bank added it would cut its dividend by half to 32c, giving it an extra $1.4bn in cash each quarter.

“Both economic and financial market conditions have changed significantly in the past two months,” Lewis said. “We now believe it is important to be at our 8% Tier 1 capital ratio target given the recessionary conditions and outlook for still weaker economic performance which we expect to drive higher credit losses and depress earnings.”

BoA blamed higher loan provisions and higher bad debts for the earnings slippage.


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