BofA shares drop close to 10 percent on capital raise

NEW YORK (Reuters) - Shares of Bank of America Corp (BAC.N) fell almost 10 percent on Tuesday, a day after the bank said it would cut its dividend and raise $10 billion to offset rising loan losses.

The bank, which swallowed mortgage giant Countrywide Financial Corp earlier this year and may acquire brokerage Merrill Lynch & Co MER.N by the end of this year, said its quarterly earnings fell a wider-than-expected 68 percent.

While the company has not avoided the credit losses and write-downs that have plagued banks during the last year, its large deposit base and retail banking network is seen as a source of strength in the current credit environment.

But Bank of America recorded an additional $1.6 billion in write-downs for the third quarter, taking its total write-downs over the last five quarters to just under $17 billion.

This figure is still well below the tally of its large retail rival, Citigroup (C.N), which has recorded more than $57.5 billion in write-downs since the credit crisis began a year ago. Citi has yet to report for the third quarter.

William Smith, president and chief executive officer of Smith Asset Management, said Bank of America's results were "typical results you would see in any contraction of the economy, in any contraction of credit." Smith said he still sees the company as a strong bank.

"I'd probably look to see the shares rally after the low here today," he added.

Shares in the company fell to $29.35 on Tuesday in pre-market trading, down 8.9 percent.

(Reporting by Elinor Comlay and Juan Lagorio; Editing by Derek Caney)