Citigroup to write off 3 Billion in CDO's

By Andrew Dowell
From The Wall Street Journal Online

NEW YORK -- Bank of America Corp. said Tuesday it will take a pretax write-down of about $3 billion in the fourth quarter to reflect a drop in value of securities related to mortgages and will spend $600 million supporting in-house money-market funds that are exposed to troubled financing entities called structured investment vehicles.

The bank also will suffer a $300 million impairment of the value of a mezzanine investment, Chief Financial Officer Joseph Price told analysts in New York.

Mr. Price also said the market for syndicating loans made to finance leveraged buyouts, while somewhat improved from the summer, remains "fragile" and will be tested by big deals that banks like Bank of America are bringing to market soon.

The disclosures make Bank of America the latest institution to lift the lid on the damage done by its exposure to positions harmed by the implosion of the market for subprime mortgage loans.

Analysts in particular have been concerned about losses related to so-called collateralized debt obligations, which bundle loans and other securities and then slice them into new debt. The market for CDOs has collapsed due to concerns about their exposure to subprime mortgages. Conditions in that market could worsen, Mr. Price warned.

"There could be an additional diminution of value," he said.

The bank cut back its share buybacks to restore its capital levels after completing its acquisition of LaSalle Bank Corp. on Oct. 1. Bank of America won't restore those cuts in buybacks before the second half of next year, Mr. Price said.

Bank of America shares recently were up 72 cents, or 1.6%, at $44.70.

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, Wachovia Corp. last week marked down the value of its loan-backed securities by about $1.1 billion, 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.

-- The Associated Press contributed to this article