Losses Spreading To Commercial Loans, Says BoA

Bank of America Says Losses Shift to Commercial Loans (Update1)

By David Mildenberg

Sept. 10 (Bloomberg) -- Bank of America Corp., the biggest U.S. consumer bank, said credit weakness is spreading to commercial borrowers from residential customers and loan losses probably will deepen in the third quarter.

Home builders unable to repay their loans are contributing to deterioration among commercial borrowers, said Brian Moynihan, head of the global corporate and investment banking unit, at a New York conference today. More than half the Charlotte, North Carolina-based bank's $13.4 billion in loans to builders are considered troubled, 19 percent are not paying interest and losses are likely to mount, Moynihan said.

Bank of America's commercial loans were $335 billion as of June 30, and a home-builder portfolio that accounts for less than 4 percent ``won't create major pain for us, but it's going up,'' he said. ``It's not pretty.''

The company is able to charge higher rates on its loans as businesses seek to borrow from companies with strong capital positions, Moynihan said. The investment banking unit will have a ``choppy'' quarter as turmoil in the credit markets delays companies from raising capital or making acquisitions, he said.

Bank of America fell 52 cents, or 1.6 percent, to $32 at 1:22 p.m. in New York Stock Exchange composite trading, and had declined 21 percent this year through yesterday.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net
Last Updated: September 10, 2008 13:23 EDT