Bank of America Goes on Offense

Bank of America Corp. reported a fourth-quarter loss of $1.79 billion Friday and went on the offensive to answer critics and shore up support for the giant Charlotte, N.C., lender during a time of crisis.

The loss, the first for Bank of America since its predecessor NCNB Corp. posted a loss in 1991, was down from a net income of $268 million a year ago. It came on the same day details emerged of a new agreement with the U.S. that provides Bank of America with $20 billion in additional federal aid and loss protections on $118 billion in toxic assets.
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Bank of America maintains it went back to the government for more support because of larger-than-expected fourth-quarter losses at Merrill Lynch and that the problems came to light after shareholders approved the Bank of America-Merrill combination on Dec. 5. But 25% of the protected asset pool belonged to Bank of America, Chief Financial Officer Joe Price said Friday, a signal that the problems weren't tied strictly to Merrill's disintegration.

The nation's largest bank by assets continues to be weighed down by rising credit costs linked to the economic downturn and an array of problems confronting U.S. borrowers. It set aside $8.54 billion for bad loans in the fourth quarter, up from $3.31 billion a year earlier. Loans written off as unpaid nearly tripled, to $5.54 billion.

It also reported write-downs and trading losses in its capital-markets business, including losses on collateralized debt obligations of $1.7 billion and write-downs on commercial mortgage-backed securities of $853 million.

nvestors sent the stock down 14% Friday, to $7.18, undermining the bank's effort to shed the best light on its situation by rushing out the release of its earnings earlier than expected and issuing a memo Thursday to employees titled "Bank of America Remains Strong." Shares fell 18% Thursday.

Chief Executive Kenneth Lewis "has very little credibility with the investor public right now," said Paul Miller, analyst with Friedman Billings Ramsey Group Inc. in Arlington, Va.



Mr. Lewis's credibility among employees may also be suffering. Many are angry not only at how the losses were handled but also that just last week they were issued compensation in the form of shares worth $14.33 apiece, said people familiar with the situation. Several employees questioned how the company could have issued the shares in light of the past week's news, these people said. Bank of America declined to comment. read more