BofA swings to $1 billion loss

By Joe Rauch

CHARLOTTE, North Carolina (Reuters) - Bank of America Corp posted a $1 billion third-quarter loss as consumer credit woes eclipsed investment banking earnings, underlining why the bank remains on a government respirator.

The nation's largest bank received two taxpayer bailouts totaling $45 billion after acquiring Merrill Lynch & Co and mortgage lender Countrywide at the height of the financial crisis last year. It says it wants to start repaying the money but has not yet done so.

Credit losses on its consumer loans are eating into the bank's results as it tries to raise capital. Bank of America (BAC.N) suffered $9.6 billion in credit losses in the third quarter, up from $4.4 billion a year earlier.

"Bank of America could continue to suffer for a while," said Malcolm Polley of Stewart Capital Advisors.

In an ironic twist, Merrill's investment banking operations -- where massive losses in the 2008 fourth quarter triggered strong criticism of Chief Executive Kenneth Lewis -- injected a shot of adrenaline into Bank of America's third-quarter results. The unit produced $2.2 billion in profits.

Lewis, 62, has said he will retire at the end of the year. He faces multiple investigations into whether he disclosed enough information to shareholders before they approved the Merrill acquisition.

"Forty years with the same company and eight years as the CEO is enough," Lewis said on the bank's earnings conference call Friday, responding to an analyst who asked why he had decided to retire.

Charlotte, North Carolina-based Bank of America reported a net loss of $1 billion, or 26 cents per share, for the third quarter, compared with net income of $1.18 billion, or 15 cents per share, in the same period last year.

Analysts' average forecast was a loss of 21 cents per share, according Thomson Reuters I/B/E/S.

Bank of America shares slid as much as 5.7 percent to $17.06 in morning trading before recovering to about $17.40 at midday. The shares rose 29 percent during third quarter but are still down more than 20 percent over the past 12 months.

CREDIT WORRIES

The bank set aside $11.7 billion during the quarter for credit losses, $1.7 billion less than in the second quarter but $5.3 billion more than in the 2008 third quarter.

Losses from home equity loans and residential and commercial mortgages soared, but the business hit hardest was the credit card unit. The unit's chargeoff rate -- the proportion of loans it does not expect to be repaid -- is the highest in the nation at 14.25 percent.

Like rival JPMorgan Chase & Co (JPM.N), Bank of America said that while loan-loss reserves and credit losses are still high, the rate of increase is slowing.

"We believe we may have peaked in total credit losses this quarter," Lewis said.