BofA to Write Off $1.2 Billion in Loans

Bank of America Corp. said Monday that it will set aside $1.2 billion in the fourth quarter for bad loans, more than analysts expected, after the bankruptcy filing of an airline that investors identified as UAL Corp.’s United Airlines.

The third-biggest U.S. bank said a tax gain of $488 million in the quarter will offset higher loan losses. Net income for the year will be as much as $5.97 a share, the bank said, more than the $5.68 forecast of analysts surveyed by Thomson First Call.

Rising loan losses at Bank of America, which wrote off $804 million in the third quarter under Chief Executive Kenneth Lewis, signal that bad loans will crimp bank profit into 2003. About 13% of $1.9 trillion in U.S. bank loans to companies were in default or unlikely to be repaid at the end of June, the biggest proportion since 1992, according to a study by federal regulators.

“Between the airlines, technology companies and energy companies, there are going to be more and more announcements of credit charge-offs,” said Phil Larkins, market strategist for Legacy South Inc. in Atlanta, which manages $350 million and owns 190,000 Bank of America shares. “You are going to see a plethora of banks fess up.”

Bank of America shares fell 19 cents to $70.11 on the New York Stock Exchange. The shares have climbed 11% this year.

The Charlotte, N.C.-based company, the second-biggest arranger of syndicated loans to U.S. companies, said the airline credits are mostly leases and the fourth-quarter write-off also includes bad loans to utility companies. The bank earlier wrote off bad loans to companies that have filed for bankruptcy protection, including Adelphia Communications Corp. and WorldCom Inc.

Among Bank of America’s $125.9 billion in outstanding commercial loans as of Sept. 30, $8.8 billion, the largest portion, was to airlines and other companies in the transportation industry, according to a Securities and Exchange Commission filing. The company had an additional $4.3 billion in outstanding loans to utility companies and $3.6 billion to telecommunications companies.