BoA to raise $10 bn, slashes dividend

NEW YORK: World's largest finance services company Bank of America, which has acquired investment banking major Merrill Lynch and Countrywide Financial, has slashed its dividend and plans to raise $10 bn adding another $1.4 bn to the company's capital.

The company initiatives aim at raising capital, targeting an eight per cent tier 1 capital ratio, which includes sale of common stock for raising $10 bn, a Bank of America statement said.

In addition, the board of directors declared a quarterly dividend on common stock of $0.32 to be paid on December 26, 2008 to shareholders of record on December 5, 2008.

Assuming the current number of issued and outstanding shares, the reduction from $0.64 paid in recent quarters would add more than $1.4 bn to the company's capital each quarter, the statement added.

"We believe it is prudent to raise capital to very substantial levels in this uncertain environment. Both economic and financial market conditions have changed significantly in the last two months.

"We were willing to operate at capital levels over the short-term that were good, but not at our targeted levels, given projections two months ago.

"We now believe it is important to be at or near our 8 per cent Tier 1 capital ratio target given the recessionary conditions and outlook for still weaker economic performance which we expect to drive higher credit losses and depress earnings," BoA Chairman and CEO Kenneth D Lewis said.

We believe that achieving higher capital levels today will position our company to provide credit to those consumers and businesses that are attracted to our strength and stability, added Lewis.