The New York Times-20080124-Bank of America to Sell --36-6 Billion in New Shares
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The Bank of America Corporation announced on Wednesday that it planned to raise $6 billion by selling preferred shares, one day after reporting a 95 percent decline in quarterly profit.
The chief financial officer, Joe L. Price, said on Tuesday that the bank planned to raise capital soon to shore up its Tier-1 capital ratio, which measures its ability to cover losses.
He said raising capital would help the bank absorb its $21 billion purchase of the LaSalle Bank Corporation from ABN Amro Holding, and its pending $4 billion acquisition of the Countrywide Financial Corporation, the mortgage lender.
Bank of America said Wednesday that it planned to sell perpetual preferred shares convertible into stock, and perpetual preferred shares without a conversion feature. Perpetual shares do not have any maturity date.
The bank intends to use net proceeds for general corporate purposes. Its own bankers are arranging the offerings.
Bank of America ended 2007 with a Tier-1 ratio of 6.87 percent, down from 8.22 percent on Sept. 30. The ratio is above the 6 percent that regulators say reflects a well capitalized bank, but is below the bank's 8 percent target.
Also on Wednesday, Sovereign Bancorp, the savings and loan, said it posted a $1.6 billion quarterly loss and canceled its dividend after a larger-than-expected write-down for consumer credit losses and a 2006 bank acquisition.
The fourth-quarter net loss equaled $3.34 a share, and compared with a loss of $129 million, or 28 cents a share, in the period a year earlier. Operating profit, excluding charges, fell 44 percent, to $94 million, or 18 cents a share, from $167 million, or 33 cents, a year earlier, Sovereign, which is based in Philadelphia, said.
Analysts on average expected profit of 16 cents a share, according to Reuters Estimates. Forecasts by analysts typically exclude one-time items.
Sovereign canceled its 8-cents-a-share quarterly dividend to help bolster capital and mitigate risk during the ongoing challenges in the financial services industry, the chief executive, Joseph P. Campanelli, said in a statement.
Sovereign wrote down $1.58 billion of good will, or $3.08 a share, which was $180 million more than it estimated last week. It attributed the increase to interest rate changes that affected its consumer and New York-area operations.
Part of the write-down reflected weakness in consumer lending, which has been hurt by deteriorating credit and a decision to halt auto loans in states in the Southeast and Southwest. The rest covered New York operations, which consist largely of the former Independence Community Bank Corporation.
