BofA may need billions for Merrill - report
Bank is in talks with Treasury Department for more funding to handle its acquisition of the troubled Wall Street firm, the Wall Street Journal reports.
NEW YORK (CNNMoney.com) -- Bank of America is reportedly negotiating for billions more in aid from the federal government to digest its recent acquisition of Merrill Lynch.
The Charlotte, N.C.-based bank told the Treasury Department last month it might not complete the acquisition because of Merrill's larger-than-expected fourth-quarter losses, according to the Wall Street Journal. Fearful that the deal's failure could further roil the U.S. financial system, Treasury officials agreed to inject more capital into Bank of America, though the terms are still being finalized. An announcement is expected with Bank of America's fourth-quarter results, scheduled for Jan. 20.
The deal may involve shielding Bank of America from the mounting losses from Merrill Lynch's bad assets, the Journal said.
Bank of America and Treasury officials declined to comment.
Bank of America (BAC, Fortune 500) has already received $25 billion in government capital, including $10 billion set aside for Merrill Lynch. The deal, which was announced hours before Lehman Brothers filed for bankruptcy in mid-September, closed Jan. 1.
The Treasury Department has less than $60 billion left to inject into banks under its capital purchase program. On behalf of President-elect Barack Obama, President George W. Bush has asked Congress to release the $350 billion remaining in the federal rescue program.
Some say banks are likely to get additional capital infusions this year. Federal Reserve Chairman Ben Bernanke said Tuesday that the government must pump more money into troubled financial institutions and that further guarantees of their debt could be necessary.
Bank of America, which had been viewed as one of the strongest banks in the country, may be buckling as the nation's economy worsens.
It has also taken over two ailing companies that thrust it deeper into the most troubled sectors of the financial system. Not only did it take a big gamble on its $24 billion acquisition of the faltering brokerage titan, but it also bought battered mortgage lender Countrywide Financial early last year.
Analysts are rapidly reducing their estimates for the bank, with some even expecting a loss. Rivals JPMorgan Chase may report its first quarterly loss during the credit crisis Thursday and Citigroup is expected to report a whopping loss on Friday.
Bank of America is expected to report higher charge-offs for uncollectable debts, increased loan reserves and greater trading losses, wrote Richard X. Bove, analyst with Ladenburg Thalmann. He reduced his estimates to $0.68 per share from $1.14 per share on Wednesday.
Merrill Lynch is expected to shave 15 cents off Bank of America's 2009 earnings, wrote Jeff Harte, analyst with Sandler O'Neill & Partners, who predicts the bank will report a 2-cent loss for the quarter.
"The acquisition of [Merrill Lynch] significantly increases [Bank of America's] exposure to currently depressed capital markets-related revenues," Harte wrote.
Bank of America already announced it plans to shed up to 35,000 jobs over the next three years as it integrates the Wall Street firm. Chief Executive Ken Lewis gave up his 2008 bonus last week. 
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