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BofA profit plunges 68%

The bank, hit by losses on mortgages and credit cards, plans to halve its dividend.

October 07, 2008|From the Associated Press

NEW YORK — Bank of America Corp. on Monday reported its third-quarter results earlier than planned, revealing a 68% profit drop and plans to boost capital by selling stock and halving its dividend.

Like most other major financial institutions, Bank of America has been hit by significant losses in mortgages, credit cards and other souring debt.

Profit fell to $1.18 billion, or 15 cents a share, for the July-to-September period from $3.7 billion, or 82 cents, a year earlier. That was much lower than analysts' estimates of 62 cents a share, according to Thomson Financial.

Bank of America shares dropped an additional 6% in after-hours trading. They closed down $2.26, or 6.6%, at $32.22.

To raise capital, the Charlotte, N.C.-based company said it planned to sell $10 billion of common stock and cut its quarterly dividend to 32 cents from 64 cents.

"These are the most difficult times for financial institutions that I have experienced in my 39 years in banking," Chief Executive Kenneth D. Lewis said. "We believe it is prudent to raise capital to very substantial levels in this uncertain environment. Both economic and financial market conditions have changed significantly in the last two months."

The company reported its results two weeks earlier than scheduled, and just minutes after the Dow Jones industrial average dropped 369.88 points to finish at 9,955.50, the lowest level in nearly four years.

Bank of America said Monday that it made a $6.45-billion provision for credit losses -- up from $5.83 billion in the second quarter and $2.03 billion in the third quarter last year -- after seeing massive deterioration in unsecured consumer loans, credit cards and residential mortgages.

To prepare for further deterioration, the bank added nearly $2 billion to its loan and lease loss allowance, which now stands at $20.35 billion, or 2.17% of its total loans and leases.

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