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US bailout arrives but banking giant still drops

BANK of America Corp, the largest United States bank by assets, posted its first loss since 1991 and cut the dividend to a penny after receiving emergency government funds to support the acquisition of Merrill Lynch & Co.

The fourth-quarter loss of US$1.79 billion, or 48 cents a share, compared with net income of US$268 million, or 5 cents, a year earlier, the North Carolina-based company said in a statement yesterday. Results didn't include a US$15.3-billion loss at Merrill, acquired this month.

The losses, coupled with the government lifeline of US$138 billion, raise doubts about the future of Chief Executive Officer Kenneth D. Lewis, who engineered takeovers of unprofitable New York-based brokerage Merrill and ailing mortgage lender Countrywide Financial Corp during the worst market slump since the Great Depression. Bank of America plummeted 75 percent up to Thursday in trading in New York after the Merrill deal was announced in September.

"This thing is unraveling so fast Lewis may know his job is lost," Paul Miller, an analyst at Friedman Billings Ramsey Group Inc in Virginia, who has an "underperform" rating on Bank of America. The management team has "lost credibility," he told Bloomberg News before results were announced.

"You will see the benefits" when the economy improves, Lewis told investors during a conference call yesterday. The bank doesn't comment on "uninformed gossip," spokesman Robert Stickler said.

For the full year, profit fell to US$4.01 billion from US$14.98 billion. Separately, Citigroup posted an US$8.29 billion quarterly loss yesterday.

The government earlier yesterday said it will invest US$20 billion in Bank of America and guarantee US$118 billion in assets to help the company absorb Merrill and prevent the financial crisis from deepening. The agreement is part of a commitment to "support financial-market stability," the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp said in a joint statement in Washington.

The bank is cutting as many as 35,000 jobs. Bank of America also has taken steps to counter loan losses by selling a US$2.8-billion share of its China Construction Bank stake.

Lewis, 61, on September 15 said the purchase of Merrill gave Bank of America "one of the premier wealth management" companies and was "a great opportunity for our shareholders."

Bank of America officials told regulators last month that the Merrill deal might be abandoned because of worse-than-expected results, insiders said, but the government insisted the transaction proceed because its collapse would create new turmoil in the financial system.

See Citigroup loss on B8


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