Bank of America, Wachovia profits nearly wiped out

By Jonathan Stempel

NEW YORK (Reuters) - Bank of America Corp and Wachovia Corp, the second- and fourth-largest U.S. banks, said on Tuesday quarterly profits were nearly wiped out by more than $10 billion of write-downs and credit losses.

Fourth-quarter earnings fell 95 percent at Bank of America and 98 percent at Wachovia, and missed analysts' forecasts. Shares of both banks rose after their chief executives said they don't expect to cut their common stock dividends.

"The environment is very tough, and we expect it to remain so for some months to come," Bank of America Chief Executive Kenneth Lewis said on a conference call. "We stay concerned about the level of domestic consumption and spending given the prolonged housing slump, subprime issues and higher fuel and food prices."

Bank earnings are falling as a global credit crunch leaves more consumers unable to pay their bills, and banks with mounting losses on debt they own. Fears of a U.S. economic recession this week fueled a global sell-off in stocks and an emergency interest-rate cut by the Federal Reserve.

"It's going to take time for banks to clean up their problems," said Michael Mullaney, who helps invest $10 billion at Fiduciary Trust Co in Boston. "We hope we don't see further spillover from mortgages into other consumer lending, including credit cards and auto loans, and commercial properties."

Regional banks are also hurting. Quarterly profit fell 80 percent at Regions Financial Corp, which operates in the Southeast, and a respective 42 percent and 83 percent at Ohio's Fifth Third Bancorp and KeyCorp. National City Corp, another Ohio bank, posted a $333 million loss.

"You had massive disruptions in the capital markets, and that has absolutely persisted," National City Chief Executive Peter Raskind said in an interview. "The Fed can't make borrowers borrow and lenders lend."

Bank of America shares closed up $1.42, or 4 percent, at $37.39, while Wachovia rose $1.11, or 3.6 percent, to $31.91. The Philadelphia KBW Bank Index .BKX> rose 3.3 percent, while the broader Standard & Poor's 500 .SPX> fell 1.1 percent.