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BofA expects higher home equity losses

May 14, 2008|From Times Wire Services

Bank of America Corp. warned Tuesday that its losses on home-equity loans would be worse than it predicted just three weeks ago, adding to evidence that more consumers are falling behind on debts.

The country's largest consumer bank also said it remained on track to complete its acquisition of mortgage giant Countrywide Financial Corp. in the third quarter.

At an investor conference in New York, Liam McGee, Bank of America's president of global consumer and small-business banking, said customers were feeling "significant economic pressure" as deflating home prices left little equity for consumers to borrow against.

He predicted that losses on the bank's home-equity loans would top the 2%-to-2.5% range projected last month.

"I think we are doing all the right things to mitigate it," he said, "and we will just have to manage through it."

In another sign of financial strain, McGee said, more people are using credit and debit cards to pay for necessities.

Card purchases of items such as fuel, food and utilities grew 13% in the first quarter, while spending on retail, travel and entertainment rose 0.5%, the Charlotte, N.C.-based bank said.

The trends at the country's largest credit card issuer support the view of economists who say the U.S. is teetering on the edge of a recession as people struggle with job losses and high gasoline prices.

Merrill Lynch & Co. analyst Edward Najarian on Tuesday reduced his estimates of the company's earnings through 2010.

Bank of America shares fell 83 cents, or 2.2%, to $36.61. Shares of Calabasas-based Countrywide rose 19 cents, or 4%, to $4.98.

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