Bank of America Corp and Citigroup Inc, two of America's largest banks, faced a crisis of confidence as their shares sank and investors questioned whether they have enough capital to cover losses from toxic assets and the contracting global economy. Bank of America Corp is close to receiving billions of dollars of support from the US government as it tries to digest Merrill Lynch & Co Inc, the investment bank and brokerage it bought on Jan. 1. Merrill has billions in troubled assets - ranging from commercial real estate to subprime mortgages - that suffered during the brutal fourth quarter. Although many banks have already received billions of dollars in government bailout funds, they are likely to go back to the well, experts said. “The large banks in the US are not lending, and they're desperate to conserve capital. They're acting like they're insolvent. The markets think they are insolvent. Banks only remain going concerns because the federal government is topping up their equity,” said Dan Alpert, an investment banker at Westwood Capital in New York. In London, the chief executive of US bank JPMorgan Chase, Jamie Dimon, told the Financial Times on Thursday that the worst of the economic crisis still lay ahead as hard-hit consumers default on their loans. “The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009,” he told the business daily. “In terms of our sector, we expect consumer loans and credit cards to continue to get worse.” Dimon said the bank - which bought rivals Bear Stearns and Washington Mutual last year - was prepared for a deterioration in consumer-orientated businesses but if things were worse than expected, it would have to cut costs further. The interview was published after a fresh wave of selling hit US and European stock markets Wednesday, as an unrelenting flow of bad economic and corporate news sparked fears of a deepening global downturn. Earlier, Citigroup Inc shares plunged 23 percent, driving the stock below $5, their lowest level since a government rescue in November. The bank faces growing concern it will struggle to rebound from punishing losses. More bad news is expected on Friday, when the bank plans to report quarterly results, six days ahead of schedule, and analysts are looking for a fifth straight multibillion-dollar loss. The bank is also widely expected to provide details of a comprehensive downsizing designed to ensure its survival. Rival JPMorgan Chase & Co, now the largest US bank by market value, also moved up its earnings report by six days to Thursday. There's little hope of a turnaround anytime soon, JPMorgan CEO Jamie Dimon told the Financial Times in an interview. “The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009,” Dimon told the paper. “In terms of our sector, we expect consumer loans and credit cards to continue to get worse.” Once the world's largest bank but now only the US No. 3, Citigroup is expected to shrink by about one-third as it focuses on corporate, investment and retail banking and trims trading operations, a person familiar with the plan said. Citigroup will also put unwanted businesses and assets into a separate structure, with an eye toward their eventual sale, the source said.
