By Christian Plumb
NEW YORK (Reuters) - Bank of America Corp, the largest U.S. bank, on Monday reported a 68 percent drop in quarterly earnings, halved its dividend and said it would seek to raise $10 billion in additional capital.
The weaker than expected profit, announced two weeks early, sent the bank's shares down 8 percent in after-hours trade.
Bank of America had been seen as one of the industry's pillars of strength and had most recently made headlines with its plan to acquire investment bank Merrill Lynch & Co Inc, but the results and accompanying moves to bolster its capital, showed that it too, is reeling from the credit crisis.
"These are the most difficult times for financial institutions that I have experienced in my 39 years in banking," said Kenneth D. Lewis, its chairman and chief executive officer, in a statement.
"We now believe it is important to be at or near our 8 percent 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."
Bank of America said third-quarter profit dropped to $1.18 billion, or 15 cents a share, from $3.70 billion, or 82 cents a share, a year ago.
Analysts looked for earnings per share of 60 cents, excluding one-time items, according to Reuters Estimates.
Bank of America warned that credit quality continued to weaken during the quarter.
The weaker earnings were driven by higher credit costs resulting largely from two of its most recent acquisitions, Countrywide Financial Corp, which had been the country's largest independent mortgage lender, and Chicago-based LaSalle Bank.
"I'm sure it's a surprise. It's another tile in the mosaic. Things are not good with financial companies. This reflects it. This has to be a disappointment," said Lou Brien, market strategist at DRW Trading in Chicago.
The Charlotte, North Caroline based bank said it was cutting its quarterly payout to 32 cents a share from 64 cents, which it said would add more than $1.4 billion in capital per quarter. In addition, it aims to sell $10 billion on new common stock.
"I don't think anything is easy in this market, but they are perceived as one of the stronger franchises and I think they will have a somewhat easier time than others (raising capital)," said Rick Meckler, chief investment officer of LibertyView Capital Management in New York.
"This is the market where you have got to hit the window when you can ... It's probably the most responsible action they can take."
(Additional reporting by Elinor Comlay and Richard Leong; editing by Jeffrey Benkoe and Bernard Orr)
