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BofA remains core holding for investors: CreditSights
NEW YORK (Reuters) - Bank of America Corp remains profitable and a "core holding" for bond investors despite weak earnings and its announcement to cut its dividend in half and raise $10 billion, CreditSights said in a report.
The largest U.S. bank, citing "recessionary conditions," on Monday halved its dividend and said it would sell at least $10 billion in new common stock to bolster capital to offset loan losses.
CreditSights, in a report late Monday, said Bank of America -- which worried some investors over the past year with takeovers of mortgage lender Countrywide Financial Corp and investment bank Merrill Lynch & Co -- would assume Countrywide's debt.
"BofA missed consensus in a difficult environment; announced a big capital raise and cut the dividend," CreditSights said in a research note. "Still it was slightly profitable and, in our view, BofA remains a core holding for fixed income investors."
Bank of America, based in Charlotte, North Carolina, warned that credit quality continued to weaken during the quarter, and the bank expects higher credit losses and depressed earnings ahead.
Third-quarter net income dropped to $1.18 billion, or 15 cents a share, from $3.70 billion, or 82 cents a share, a year ago.
CreditSights said Bank of America would be "a survivor in the industry despite the weaker than expected earnings."
(Reporting by Walden Siew, Editing by Chizu Nomiyama)
