Bank of America, the second-largest US bank, says it expects to write down US$3 billion ( $3.91 billion) of debt in the fourth quarter, as fallout from the nation's housing slump deepens.
The pretax loss stemmed from collateralised debt obligations, including those tied to subprime mortgages, and couldgrow if conditions worsened, chief financial officer Joe Price said yesterday.
Price said Bank of America was setting aside more money for housing-related losses, including to homebuilders, and to money market mutual funds that might be exposed to risky debt. The bank nevertheless considered the losses manageable, he said.
Shares of the North Carolina-based bank rose 4 per cent, as some analysts had projected an even larger write-down.
Bank of America joined Citigroup, Morgan Stanley, Wachovia and other banks in projecting large fourth-quarter write-downs for exposure to mortgages and other debt that investors were no longer willing to buy.
"With the significant deterioration that we've seen ... it does make these things difficult to value," Price said.
Citigroup said it might write off US$8 billion to US$11 billion, while Morgan Stanley projected US$3.7 billion and Wachovia US$1.1 billion. Industry-wide write-downs so far total well over US$40 billion.
Analysts had expected Bank of America to post a fourth-quarter profit of US$1.10 per share on revenue of US$18.82 billion. The US$3 billion loss equals roughly one month of profit.
