Bank of America may post $3.6b fourth quarter loss

New York: Bank of America Corp, the largest US lender in terms of assets, may post a $3.6 billion (Dh13.24 billion) fourth quarter loss and again slash its quarterly dividend, Citigroup Inc analyst Keith Horowitz said.

Bank of America is likely to report a loss of 75 cents a share, compared with an earlier estimate of a 2 cents-a-share profit, Horowitz said in a note to clients today. The Charlotte, North Carolina-based bank may also reduce its dividend to 5 cents a share from 32 cents, he added.

Chief executive officer Ken Lewis is cutting as many as 35,000 jobs after completing the takeover of Merrill Lynch & Co. Bank of America was downgraded last week by Moody's Investors Service on prospects for lower earnings from investment banking and higher losses from borrower defaults.

"Investors should be braced for a very challenging fourth quarter," Horowitz wrote.

The lender declined $1.56, or 12 per cent, to $11.43 in New York Stock Exchange composite trading on Monday. The bank lost 70 per cent of its market value in the past 12 months.

Bank of America raised $10 billion in October in a share sale after posting a 68 per cent decline in third-quarter profit. The lender also received $25 billion from the US Treasury programme to bolster financial firms and halved its dividend to 32 cents a share as Lewis prepared for a slower economy.

Bank of America may have cumulative losses of $165 billion between 2008 and 2011, Horowitz said in a note yesterday.

"So far about 33 per cent have been taken either through loan loss provision or purchase accounting marks," he said.

About a third of the expected losses, or $57 billion, are likely from credit-card lending, with about $29 billion from home loans made by Countrywide Financial Corp., Horowitz wrote.

Bank of America became the largest US home lender with its acquisition last year of Countrywide.

Buying Merrill Lynch poses credit and integration risks for Bank of America, which anticipates $7 billion in annual cost savings from the merger, Horowitz said in the report.

He estimates investment banking revenue will decline 35 per cent in 2009 from last year's levels, with wealth management revenue falling 20 per cent.

$165b cumulative losses likely for Bank of America

70% decline in bank's market value over last 12 months