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Bank of America upbeat on Countrywide, capital
NEW YORK (Reuters) - Bank of America Corp (BAC.N) is moving forward with plans to buy Countrywide Financial Corp CFC.N, the largest U.S. mortgage lender, and doesn't need more capital after raising $12.9 billion last week, Chief Executive Kenneth Lewis said.
"Everything is a go to complete this transaction," Lewis said at a Citigroup Inc financial services conference, referring to Countrywide, which earlier Tuesday posted a larger-than-expected $421.9 million fourth-quarter loss.
Lewis's comments allayed fears that the second-largest U.S. bank might try to renegotiate or back out of the roughly $4.3 billion Countrywide purchase, which valued the lender at $7.16 per share. Prior to Tuesday, Countrywide shares were trading 17 percent below that level.
Like many rivals, Calabasas, California-based Countrywide has suffered from rising defaults and write-downs on loans it holds. It said that at the end of 2007, more than one in three borrowers with subprime mortgages were making payments late.
"The items driving the loss were consistent with our due diligence and (the) transaction price," Lewis said. He also said there has been "dramatic" improvement in the fundamentals of the mortgage business.
Countrywide's quarterly loss equaled 79 cents per share, 47 cents larger than analysts had on average expected, according to Reuters Estimates. The loss was nevertheless 65 percent smaller than the third-quarter loss, which totaled $1.2 billion.
Lewis said Charlotte, North Carolina-based Bank of America had sufficient capital after last week selling $6 billion of preferred shares yielding 8 percent and $6.9 billion of convertible preferred shares yielding 7.25 percent.
He said there was enough investor demand for the bank to raise more than 2-1/2 times what it did, or in excess of $32 billion.
Bank of America suffered a 95 percent drop in fourth-quarter profit because of write-downs on collateralized debt obligations and rising consumer losses.
Lewis said credit costs might rise 20 percent in 2008, but the bank could manage such an increase.
Bank of America decided to raise capital after spending $21 billion last year to buy LaSalle Bank Corp from Dutch bank ABN AMRO Holding NV AAH.AS and Charles Schwab Corp's (SCHW.O) U.S. Trust wealth management unit. LaSalle operates mainly in the affluent Chicago area and slower-growing Michigan.
"You should not assume that we regret LaSalle. We don't." Lewis said.
Bank of America shares were up 52 cents to $41.72 in afternoon trading on the New York Stock Exchange.
(Reporting by Jonathan Stempel; Editing by Gerald E. McCormick)
