Bank Of America’s Earnings Drop 68%, Cuts Dividend
By David Spurr on October 7, 2008 | More Posts By David Spurr | Author's Website
Today was one of the wildest days that I can remember. After the close, Bank Of America (BAC) came out and cut their dividend in half. They also saw their net income drop 68%. The stock was off sharply in after hours trading (see chart below)…trading around 29.00 level.

They’re facing prospects of additional write-offs. Lewis stated that this is one of the toughest banking environments he’s witnessed in his lifetime.
- “These are the most difficult times for financial institutions that I have experienced in my 39 years in banking,” said Chairman and Chief Executive Kenneth D. Lewis. He added that the company believes it’s “prudent” to raise capital as market conditions have changed “significantly” in the past two months.
- Credit-loss provisions soared to $6.45 billion from $2.03 billion a year ago and $5.83 billion in the second quarter. The Charlotte, N.C., company said the economy has moved to a recessionary environment, adding the risk of a “prolonged recession” has increased.
- Net charge-offs, or loans the company doesn’t think are collectable, jumped to 1.84% from 0.80% of total average loans and leases a year ago and 1.67% in the second quarter, reflecting housing market deterioration and slowing economic conditions. Nonperforming assets surged to 1.42% from 0.43% a year ago and 1.13% in the second quarter.
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