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Bank of America emphasizes its financial strength

February 14, 2009|Associated Press

CHARLOTTE, N.C. — Bank of America Corp. Chief Financial Officer Joe Price assured employees Friday that the company had enough cash to finance operations for more than two years.

"Market turmoil has created lingering industrywide concerns that magnify the importance of maintaining an extra level of capital to support business activities," Price said in a question-and-answer dialogue posted on the company's internal website.

He added, "We currently have enough cash on hand to fund our parent company operations for more than two years without having to issue additional debt during that time."

Price went on to say that Bank of America believes that it has the best deposit franchise in the world, which is a "very cost-effective funding source," and that the company's liquidity "continues to be strong despite the difficult market environment."

Bank of America shares fell 30 cents, or 5.1%, to $5.57 on Friday. Its shares traded at a 25-year low of $3.77 last week.

"The stock price is a daily indicator of current market sentiment and should not be confused with the capital or liquidity that we use to fund our operations, make loans or otherwise invest in revenue-generating activity," Price said in the posting.

Charlotte, N.C.-based Bank of America serves more than half of all U.S. households and millions of businesses.

The company's Tier 1 ratio -- the measure commonly used to rate a bank's strength -- was 9.15% at year-end, in excess of what regulators regard as well-capitalized.

But broad concerns remain regarding the health of the nation's banks as the U.S. financial system faces its worst crisis since the Great Depression of the 1930s.

This week, Treasury Secretary Timothy F. Geithner said the government would boost lending, determine which banks should get extra funding and remove toxic assets from banks' books -- but he provided few details about how the plans would work.

Bank of America has already received $45 billion in government aid, including a $20-billion injection last month to help it absorb losses from its Merrill Lynch & Co. acquisition.

Over the last couple of weeks, Chief Executive Ken Lewis has reiterated that his company is strong, saying that Bank of America would not need additional federal funding and that he hopes the bank can pay back the $45 billion within three years.

Lewis spent almost $1 million last week buying shares of his struggling company.

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