In this anything-goes market, investors -- particularly in bank stocks -- have all but forgotten about return on their money. The main concern is return of their money, especially after the demises of Indy Mac and Washington Mutual brought the phrase "run on the bank" back into the mainstream for the first time since the Great Depression.

Thankfully, Bank of America (NYSE:BAC) isn't going anywhere anytime soon, and it's actually still holding up quite well. Really? Really. Third-quarter results came in Monday, and despite getting a less-than warm welcome from shareholders (the stock is down 15% as I write this), there's quite a bit to be thankful for.

Bank of America earned $1.18 billion, or $0.15 per share, on revenue of $19.9 billion, compared with the $3.70 billion, or $0.82 per share, earned in the same period last year -- when the industry wasn't melting down, mind you. Here's how a few numbers looked compared with last year:


Q3 2008

Q3 2007

Total Revenue

$19.90 billion

$16.47 billion

Net Income Per Share



Nonperforming Assets



Net Charge-offs



Tier-1 Capital



Total Assets

$1.83 trillion

$1.60 trillion


$586 billion

$702 billion

On top of the earnings, Bank of America announced it was cutting its quarterly dividend in half and planning to raise $10 billion in new capital to see it through the storm. Bad news? I certainly don't think so. Slashing the dividend could save the company $5.6 billion per year -- money that it can use to reload its coffers, put aside for future losses, and otherwise hoard to ensure it doesn't become the next credit-crisis victim. Remember, Bear Stearns, Freddie Mac (NYSE:FRE), Fannie Mae, Lehman Brothers, AIG (NYSE:AIG), WaMu, and Wachovia (NYSE:WB) were all apparently "well capitalized" right before they collapsed. In a market where perception trumps reality, Bank of America's making a smart move by preemptively raising capital and cutting its dividend before the bad news strikes, which is why I called for it to cut its dividend three months ago.

What happens now? With Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) duking it out over Wachovia, the market for megabanks is heating up. Bank of America's answer to this was its surprise acquisition of Merrill Lynch (NYSE:MER), which it bought soon after Lehman Brothers' collapse a few weeks back for around $50 billion. Unlike its acquisition of Countrywide earlier this year, Bank of America paid a pretty penny for Merrill, which doesn't leave much room for error should the credit crunch get much worse. That's when things could get ugly.

Sure, Merrill is a top-notch franchise with one of the best brokerage units in the world, but the question becomes whether the strength of that brokerage was built on the mother of all financial bubbles. With the future of financial markets as murky as it is now, it's just too hard to tell if it paid a good price for Merrill.

Bank of America has earned three stars in our Motley Fool CAPS rating service. Care to throw in your two cents? Go to CAPS and tell us what you think.

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