Bank of America says Merrill to cut 2009 earnings

NEW YORK (Reuters) - Bank of America Chief Executive Kenneth Lewis said on Monday that his company's deal to buy Merrill Lynch would create a bank that would have taken 10 years to build -- but would also trim near-term earnings.

The deal was arranged over the weekend amid talks over the stricken Lehman Brothers Holdings Inc, which filed for bankruptcy protection on Monday.

On a conference call with investors, Lewis said the purchase, expected to be completed in the first quarter of 2009, would reduce earnings per share by 3 percent next year. He expects the combined entity to break even in 2010.

Bank of America also announced that it would see a $2 billion (1.1 billion pound) restructuring charge from the transaction, which values Merrill at $50 billion. Lewis said he expected the deal to cut costs by $7 billion pretax.

"This creates the company it would have taken a decade to build," said Lewis.

Merrill Lynch had been rocked by the credit crunch, posting more than $40 billion in credit losses and write-downs over the last year. Analysts expect the bank to post further write-downs when it reports third-quarter results next month.

Shares of Merrill Lynch climbed 26.2 percent to $21.52 in early New York Stock Exchange trade, while Bank of America was down 15.4 percent at $28.55.

(Reporting by Elinor Comlay; Editing by Lisa Von Ahn)