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Nickelless
Administrator
USA
5580 Posts |
 Posted - 01/15/2009 : 06:23:44
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The U.S. Treasury Department is moving to provide Bank of America billions of dollars in additional aid as the bank struggles with mounting losses at Merrill Lynch, which it recently acquired, a person briefed on the talks said Wednesday.
It would be the second bank after Citigroup to receive an additional lifeline from the government.
U.S. regulators and executives at Bank of America, which has already received $25 billion from the Troubled Asset Relief Program, have grown increasingly concerned at greater-than-expected losses in the fourth quarter at Merrill, said the person, who spoke on condition of anonymity because he was not authorized to disclose the information. The move to help shore up Bank of America comes on the heels of greater U.S. government intervention in Citigroup. After pumping more than $45 billion in Treasury money onto its balance sheet, the government has put pressure on the bank to dismantle the troubled empire in an effort to stem losses and curb capital injections.
While Bank of America was viewed not that long ago as a pillar of strength in the banking sector, it has seen its stock plummet as investors worry that it has acquired companies with their own set of financial baggage.
Besides the Merrill acquisition, which closed at the beginning of 2009, Bank of America also acquired troubled mortgage lender Countrywide last year.
Meanwhile, losses are mounting in the bank's huge consumer credit-card and home-equity businesses as the economy continues to sputter leaving some analysts to wonder whether, in order to shore up its balance sheet, the bank would be forced to either try to raise capital, slash its dividend or try to sell assets.
Details of the new government capital infusion are expected to be made known next week when the bank, based in Charlotte, North Carolina, reports fourth-quarter results. In recent weeks, analysts have slashed their earnings forecasts for the bank, expecting various losses, provisions and charges in the quarter to come in anywhere from $3 billion to $6 billion.
As Bank of America struggles to integrate the two key acquisitions of Countrywide and Merrill Lynch, some analysts warned that the next two years could be challenging for the bank and its leaders.
"Citi is being unwound because it's too big and the government wants it smaller," said Paul Miller, an analyst with Friedman Billings Ramsey & Company. "I think Bank of America, either a year or two out, is going to be dismantled also because its returns are going to be too weak. No management has the expertise or brain power to provide the right required return for investors with institutions that are this size."
Since taking the reins of Bank of America in 2001, the chief executive, Kenneth Lewis, has made several purchases, including the 2006 acquisition of credit-card giant MBNA, which made Bank of America a dominant players in consumer banking. The sharp contraction in the economy is causing losses in those businesses to climb, warn analysts.
"We know that losses are going to increase in Bank of America's consumer book, including credit cards, home equity loans, first mortgages," said Jefferson Harrelson, an analyst with Keefe Bruyette & Woods. "They'll have to add to their reserves to reflect the consumer environment, which has gotten worse."
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NotABigDeal
1000+ Penny Miser Member
USA
3890 Posts |
Posted - 01/15/2009 : 06:29:28
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Funny, I literally just saw a commercial about how sound and secure their bank is. More customers than everyone else or something. Blah, blah, blah....
Deal |
Live free or die.
Plain and simple.
"If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your council or your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen."
- Samuel Adams |
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Bank of America may receive more bailout money
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