Bank of America's
shares were falling Wednesday after the company's chief executive said writedowns will worsen and fourth-quarter earnings will likely be "quite disappointing."
Speaking at the Goldman Sachs Investor Conference, BofA Chairman and CEO Kenneth Lewis said its writedowns for collateralized debt obligations will be larger than have already been reported, "although obviously we won't know our final numbers until we close the fourth quarter."
Last month, the company estimated pretax CDO writedowns of $3 billion.
Also, trading revenue has been "considerably depressed by the lack of business activity and widening spreads in a number of product categories," Lewis said. His remarks were reported in a document filed with the
Securities and Exchange Commission
"While we do not make a practice of forecasting quarterly earnings, I think you certainly can assume results will again be quite disappointing," he said. "At this point, the final writedowns of CDOs are unknowable, but we expect to be profitable in the fourth quarter."
BofA's shares were losing 1.8% to $43.85 in premarket trading. The company currently expects loan-loss provision expenses of around $3.3 billion in the fourth quarter, indicating increased reserves of about $1.3 billion.
Lewis also discussed the broader economy, saying a slowdown is definitely occurring. "We expect weak fourth and first quarters, but at this point we are not forecasting a recession," he said.
Gross domestic product, BofA believes, will grow at a below-trend 1.5% to 2% next year, reflecting an improvement in the second half.
"The financial services industry today faces its greatest challenges in decades," Lewis said. "In the short term, we at Bank of America are intensely focused on managing through the current market turbulence which we think will extend into 2008."