Bank of America said today that 2008 net profit fell by 73% from the previous year, to $4 billion, due to heavy losses incurred by its new subsidiary Merrill Lynch.
The largest US bank by assets, which just received a new capital injection of $20 billion from the government, had reported a $14.9 billion net profit for 2007.
For the fourth quarter of the year, Bank of America posted a loss of $1.7 billion, after managing a modest profit of $268m a year earlier.
The loss per share in the final three months of 2008 was 48 cents, much wider than analysts' consensus forecasts of eight cents.
Meanwhile, Bank of America is set to receive $20 billion in fresh capital and a $118 billion asset guarantee programme to help shore it up after acquiring Merrill Lynch.
The US Treasury Department announced the move early today in a joint statement with the Federal Deposit Insurance Corporation.
The Treasury will invest the $20 billion from its financial bail-out fund - the Troubled Assets Relief Program (TARP) - in exchange for preferred shares.
The Treasury and the FDIC will also 'provide protection against the possibility of unusually large losses' on $118 billion of loans. These assets are linked to residential and commercial property loans.
Bank of America has already received $25 billion in capital injections from the TARP, which was set up mainly to help rescue banks reeling from financial turmoil triggered by a home mortgage meltdown. That included $10 billion for the brokerage firm Merrill Lynch, which Bank of America bought in a deal that closed January 1.
In return for the aid, Bank of America must meet strict restrictions on executive pay, and implement a mortgage loan modification programme.
