UPDATE 1-BofA drops nearly 8 percent on capital-raising

(Adds comment from asset manager, analyst on Merrill)

NEW YORK, Oct 7 (Reuters) - Bank of America Corp (BAC.N) shares fell almost 8 percent on Tuesday, the day after the company 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 early next year, said its quarterly earnings fell a wider-than-expected 68 percent.

"(Lower) earnings, cutting dividends, forecasting difficult times ahead -- I think that's going to be the mantra for most companies reporting, particularly in the financial area," said Robert Lutts, chief investment officer of Cabot Money Management.

While Bank of America reported earnings two weeks early, quarterly results at top rivals such as JPMorgan Chase & Co (JPM.N) remain a big question mark.

Bank of America has not avoided the credit losses and write-downs that have plagued banks during the last year, but 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, bringing the total over the last five quarters to just below $17 billion.

This figure is still well below the tally of 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 not yet reported third-quarter results.

Smith Asset Management Chief Executive William Smith 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 saw the company as a strong bank.

Yet there may be concerns ahead as Bank of America looks to complete its acquisition of Merrill Lynch.

Merrill is likely to post large write-downs from its fixed-income, currencies and commodities business this quarter, and its valuable wealth management business may also be starting to feel the pinch, according to Wachovia Capital Markets analyst Douglas Sipkin.

This may worry Bank of America Chief Executive Kenneth Lewis, who described the wealth management business as the "crown jewel" of the Merrill acquisition when the deal was announced last month.

Shares in the company fell 7.8 percent to $29.70 in trading before the market opened. (Reporting by Elinor Comlay and Juan Lagorio; Editing by Derek Caney and Lisa Von Ahn)