| NEW YORK/CHARLOTTE
NEW YORK/CHARLOTTE Bank of America Corp (BAC.N) Chief Executive Brian Moynihan said on Wednesday he often regrets the bank's 2008 purchase of mortgage lender Countrywide, but the loan losses from that deal will not force the bank to issue new shares.
It was the first time the bank has expressed regret over its 2008 Countrywide purchase, which has saddled Bank of America with billions of dollars of mortgage losses.
Moynihan's admission shows the extent to which the bank is still reeling from the housing crisis, and the intensity of investor fear that losses from that deal will force the bank to issue more shares to bolster its balance sheet.
"Obviously there aren't many days when I wake up and think positively about the Countrywide acquisition in 2008," said Moynihan during a conference call arranged by Fairholme Capital Management, one of the bank's biggest shareholders.
The bank's shares, down as much as 11.3 percent on Wednesday, have lost about a quarter of their value over the last week.
Moynihan, who took over as CEO in the beginning of 2010, said the bank will not issue new shares after having issued so many after the financial crisis of 2008 and 2009. Bank of America now has more than 10 billion shares outstanding, compared with 4.5 billion in mid-2008, when Ken Lewis was chief executive and big acquisitions of troubled companies seemed like a good strategy.
Despite assurances that a new share offering is not on the horizon, Moynihan gave little guidance on when shareholders can expect money to be returned to them either through a dividend increase or share repurchases.
Earlier this year, the Federal Reserve rejected the bank's request to increase its current quarterly dividend of 1 cent per share. BofA's management initially told shareholders to expect a dividend increase in the second half of 2011, but that appears increasingly unlikely.
Moynihan said the bank would raise its dividend when it received approval but said he has had "no success so far" in predicting when it might increase.
"We will ask for a dividend when we are darn well sure we'll get approval and we're not going to ask a minute sooner," Moynihan said.
A NUMBER OF LEVERS
Moynihan said the bank is working to meet its goal of annual earnings of $45 billion -- before taxes and setting aside money for loan losses -- by 2013. The bank first outlined that target this March at its investor day presentation.
But he said a sputtering economy and low interest rates are undermining the bank's efforts.
"To get to the $45 billion level you need to have an economy that is functioning more normally than the economy is now," he said.
To help offset slower revenue growth, BofA is introducing a cost-cutting plan. Moynihan said the plan -- known as New BAC -- will be publicly discussed when the bank announces third-quarter results in October, but he noted the bank could trim up to $1.5 billion per quarter in expenses.
Moynihan was speaking on a 90-minute conference call that included more than 6,000 investors.
Analysts in June estimated that the bank could need to boost capital by $50 billion to comply with new regulatory requirements. Moynihan said last month that the bank could generate the new capital it needs through earnings.
The bank has other ways to improve its capital position, including selling assets, said Chief Financial Officer Bruce Thompson.
"As we look at capital and growing capital beyond the end of 2012, we have a number of levers that we will look to continue to utilize," Thompson said.
But the bank may face legal liabilities from mortgages and mortgage securities that are difficult to forecast.
Chris Gamaitoni, an analyst at Compass Point Research & Trading, wrote in a report on Wednesday that in the worst case scenario, the bank could have to buy back some $62.2 billion of bad mortgages from investors. That figure is about $44.4 billion more than the funds the bank has already set aside to cover the liability.
(Additional reporting by Dan Wilchins; Editing by Robert MacMillan, Gerald E. McCormick and Steve Orlofsky)