Bank of America Corporation will take a $3 billion debt-related write-down in the fourth quarter. A write-down means reducing the book value of an asset, because it is overvalued compared to the market value. This is usually reflected in the company’s income statement as an expense, thereby reducing net income.
This comes as fallout from the housing and mortgage-lending slump. Joe Price, chief financial officer added that the bank, one of the nation’s largest, is also setting aside more money for potential losses but considers the losses “manageable.
Bank of America, the nation’s second largest bank by assets, is the latest of several financial service companies to lower the value of their lending portfolios in the wake of the subprime lending crisis. Mortgage-related write downs across the banking industry were more than $40 billion in the third quarter, and the fourth quarter could end up being worse. Along with Bank of America and Wachovia, Citigroup Inc. has said it will write down as much as $11 billion and Morgan Stanley anticipates a write-down of up to $6 billion in the fourth quarter.
