Escalating credit costs forced Bank of America Corp., Connecticut’s largest out-of-state bank, today to report a $2.39 billion fourth-quarter loss, hours after it convinced the federal government it needed a multibillion-dollar lifeline to survive the absorption of Merrill Lynch’s hefty losses.
Bank of America, which has 173 bank branches in Connecticut, also attributed the loss to write-downs and trading losses in the company’s capital markets business, but said most of its core business units remained in the black.
Both retail and wealth management segments posted profit and the bank saw narrower losses in its investment bank during the quarter. The results don’t reflect the $15.31 billion loss Merrill Lynch suffered.
After a marathon negotiating session, the Bush administration agreed early today to give Bank of America an additional $20 billion worth of fresh capital to help it stomach the losses at Merrill Lynch, which the company acquired Jan. 1. The funds are in addition to $25 billion in TARP rescue funds Bank of America has already received.
The new infusion means Bank of America has now taken $45 billion of government aid, the same amount as Citigroup Inc. In connection with the package, Bank of America slashed its quarterly dividend to a mere penny from 32 cents, agreed to further limit executive pay and and work more intensively to modify the mortgages of distressed homeowners.
For the fourth quarter of 2008, Charlotte-based BofA posted a loss after paying preferred dividends of $2.39 billion, or 48 cents per share, down sharply from a profit of $215 million, or 5 cents per share, a year ago. BofA cited rising credit costs, significant writedowns and trading losses in its capital markets businesses amid the deepening economic recession.
Meanwhile, Merrill Lynch posted a loss of $15.31 billion, or $9.62 per share, for the period — underscoring Bank of America’s assertion that it needed extra U.S. aid in order to absorb the investment bank’s bad mortgage bets.
At 11 a.m., shares of Bank of America traded at $7.72, down 60 cents, or 7.2 percent. (AP)
