Bank of America Releases Poor Results, Cuts Dividend

Bank of America cut in line late Monday and announced its financial results for the third quarter of 2008. The financial results were highlighted by earnings of $1.18 billion, or 15 cents a share, a 68 percent drop from the same period a year ago. Analysts polled by FactSet Research had expected earnings of 61 cents a share.

Bank of America Corporation (NYSE: BAC) also announced that it intends to raise $10 billion through a common stock offering. It also instated a quarterly dividend of $0.32 on each share of its common stock, reduced from $0.64, a move the company said will add more than $1.4 billion to capital each quarter.

According to Chairman and Chief Executive Officer Kenneth Lewis, “We know many investors in our stock are quite disappointed with a dividend reduction. It is not a decision we made lightly.” Lewis continued, “However we cannot pay out what we have not earned. Our goal is to resume dividend increases from the new level as soon as our earnings performance warrants.”

Bank of America’s stock was hammered early Tuesday on the news, with shares trading nearly 20 percent lower at midday.

BAC’s credit card business also saw turmoil, with decreases in purchase volumes, slowing repayments and increased delinquencies. Credit Card net charge-offs increased to $1.24 billion, a net charge-off rate of 6.14 percent. Credit card managed net credit losses rose to $3 billion, a loss rate of 6.40 percent.

Credit losses rose to $6.45 billion from $5.83 billion in the Q2 and $2.03 billion in 3Q07. Its net charge-offs rose to $4.36 billion from $3.62 billion in the Q2 and $1.57 in 3Q07. Total managed net losses were $6.11 billion.

A press release noted that the company extended its lead as the largest retail depository institution with a $35 billion dollar addition from its purchase of Countrywide, increasing retail deposits to $586 billion at the end of Q3. 

Barclays Capital Analyst Jason Goldberg wrote in an investor’s note Tuesday, “Bank of America continues to be hampered by the current environment.” Goldberg along with the rest of Barclays analysts expect that BAC will be in a better position in the long-term, but present and near-term results will still be a challenge.