Bank of America Corp. moved up its third-quarter earnings announcement by two weeks Monday, releasing results that failed to match analyst estimates and in the same breath slashing its quarterly dividend in half.
The Charlotte company also announced plans to sell $10 billion of common stock in response to what it described as "significantly" changing market conditions, including rapidly deteriorating credit quality.
B of A's profit fell 65% from the second quarter and 68% from a year earlier, to $1.18 billion.
At 15 cents a share, the $1.83 trillion-asset Charlotte company's earnings were 47 cents below the average analyst's estimate, according to Thomson Reuters.
Until recently Kenneth D. Lewis, B of A's chairman, president, and chief executive officer, had defended his company's dividend, saying on multiple occasions that only the threat of a prolonged recession could call it into question.
In July the company bought Countrywide Financial Corp. and last month it agreed to buy Merrill Lynch & Co. Inc. The two deals have strained capital levels.
B of A had originally planned to release its quarterly results on Oct. 20.
On Monday, Mr. Lewis said in a press release, "We believe it is prudent to raise capital to very substantial levels in this uncertain environment," where economic and financial market conditions "have changed significantly in the last two months."
The release also stated that the economy "has moved to a recessionary environment, and the risk of a prolonged recession has increased."
B of A expects to shore up $1.4 billion of capital by reducing the dividend.
It blamed the poor earnings on worsening credit quality, pointing in particular to unsecured consumer lending, credit cards, and residential mortgages.
The provision for loan losses rose 10.6% from the second quarter and more than tripled from a year earlier, to $6.45 billion. Nonperforming assets rose 37% from the second quarter and 296% from a year earlier, to $13.36 billion.
Comparisons from a year earlier were skewed by the Countrywide acquisition, which B of A closed on July 1.
However, the company said that the mortgage lender added $259 million of operating earnings, or 6 cents a share, during the third quarter.
In the release, Mr. Lewis said: "These are the most difficult times for financial institutions that I have experienced in my 39 years in banking."
