Thread: Bank of America to raise $10bn in capital

BofA to raise $10bn in capital

By Deborah Brewster and Joanna Chung in New York
Monday Oct 6 2008 18:10

Bank of America's announcement three weeks ago that it was acquiring Merrill Lynchappeared to cement its leadership in the financial industry.

But its announcement on Monday, which sent its shares tumbling in after-hours trading, demonstrated the toll the credit crisis is taking on banking's surviving firms.

Bank of America said it would cut its dividend by half to 32 cents, giving it an extra $1.4bn in capital each quarter. The lastest capital raising, which follow a big capital raising by the bank earlier this year, would involve common stock.

"Both economic and financial market conditions have changed significantly in the past two months," Mr Lewis said. "We now believe it is important to be at our 8 per cent 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."

Of the dividend cut, Mr Lewis said: "We cannot pay out what we have not earned."

However, he said the bank remained profitable and he had never been more optimistic about its long-term future.

The drop in earnings - which were announced two weeks earlier than scheduled - was the result of higher loan provisions. Credit card use also dropped, while delinquent payments rose.

BofA's results highlighted a widespread flight to safety, with deposits rising by $56bn to $586bn in the quarter as consumers shifted money out of stocks and bonds. The gains included Countrywide Financial, the mortgage lender BofA acquired in July this year.

BofA on Monday agreed to settle multi-state claims of deceptive and predatory lending practices against Countrywide, in a deal that could result in a cut of up to $8.4bn in payments for homeowners.

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Bank of Illegal Aliens......How can they even be solvent with all of the loans made to illegals?