Bank of America fourth-quarter CDO-related write-downs likely to exceed previous projection

By Jennifer Lanning Drey

Portland, Ore., Dec. 12 - Bank of America Corp. expects fourth-quarter write-downs related to collateralized debt obligations (CDOs) to exceed the company's previous estimate of $3 billion, chief executive officer Ken Lewis said Wednesday during a presentation at the Goldman Sachs Financial Services CEO Conference in New York.

"In the past month, the markets have turned down again and will probably be challenging into next year," Lewis said.

In addition to the CDO-related troubles, Lewis said Bank of America's trading revenue has been considerably depressed by a lack of business activities and widening spreads in a number of product categories.

"While we do not have a practice of forecasting quarterly earnings, I think you certainly can assume results will be disappointing. The final write-downs of CDOs are unknowable, but at the present time we do expect to be profitable in the fourth quarter," he said.

Also during the presentation, Lewis said Bank of America plans to monetize its investment in the China Construction Bank and is currently working with the Chinese to determine the level they would be comfortable with Bank of America holding.

Bank of America can begin monetizing the Chinese bank investment in 2008.

The comments were made in response to a question from an analyst.

Slow economy, no recession

Additionally on Wednesday, Lewis addressed general economic conditions, which the bank believes to be slowing but not yet to the level of a recession.

"The economy is definitely slowing. We expect weak fourth and first quarters, but at this point, we're not forecasting a recession," Lewis said.

Bank of America believes that GDP will grow at the below-trend level of 1.5% to 2.0% in 2008, with the second half of the year being stronger than the first.

"However, we are closely watching the impact on consumers of the housing recession, high energy costs and subprime loans. Obviously, credit quality will be impacted by whatever happens in the economy.

"Credit quality has been good, but we do not see the current levels continuing as economic growth slows," Lewis said.

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