Dec. 12 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis is learning the hazards of economic forecasting.

Six months after saying the slowdown in U.S. housing sales was ``just about to be over,'' Lewis said today at an industry conference in New York that fourth-quarter profit will be ``quite disappointing'' and predicted a `challenging'' 2008 with higher writedowns for securities tied to the mortgage market.

Lewis said fourth-quarter losses from the credit markets will be more than the $3 billion that Charlotte, North Carolina- based Bank of America estimated last month. The world's biggest financial institutions have announced combined writedowns of more than $80 billion since August because of losses in the U.S. home- loan market.

``What's disturbing is it sounds like Bank of America is becoming more bearish on the U.S. economy,'' said Jeffrey Harte, a Chicago-based analyst at Sandler O'Neill & Partners LP, in an interview. ``Their franchise probably spans the consumer more than others, so what they say is meaningful.''

Bank of America fell 2.8 percent to $43.40 in New York Stock Exchange composite trading at 2:17 p.m., increasing this year's drop to 19 percent. That compares with the 43 percent slump of Citigroup Inc., the biggest U.S. bank by assets, and the 5.3 percent drop of JPMorgan Chase & Co., the third-largest. Citigroup and JPMorgan are based in New York.

Reliance on U.S.

Bank of America is the country's second-largest bank by assets and biggest by deposits, and generates more than 80 percent of its revenue from the domestic market. Analysts have been estimating the company will earn $3 billion, or 76 cents a share, in the fourth quarter.

Lewis's comments on June 19 contrasted with economists such as Nouriel Roubini, a former Clinton Administration Treasury Department director. Roubini said there was a 50 percent chance the economy would be in a recession by the end of this year.

Lewis's optimistic view wasn't unusual at the time, said Alex Pollock, a former president of the Federal Home Loan Bank of Chicago.

``Early in the summer, a lot of people including high- ranking Washington officials, thought it was a problem in the subprime sector that wasn't going to spill over into other areas,'' said Pollock, a resident fellow at the American Enterprise Institute in Washington. ``Like the old saying, forecasting is easy, but forecasting correctly is the hard part.''

Even those forecasting troubles ahead understated the severity of the credit market slump. While Wells Fargo & Co., the nation's fifth-biggest bank, started predicting higher losses from home loans three years ago, Chairman Richard Kovacevich said yesterday he didn't expect conditions to become so severe.

Credit Rating

Wells Fargo erred by loosening its requirements when lending money tied to the value of homes, Kovacevich said. The bank reported Nov. 27 that it will take a $1.4 billion pretax charge on losses linked to its $83 billion home equity loan business.

``When you get out on the edge, you get a $1.4 billion hit,'' he said. ``And billions and billions pretty soon add up to real money.''

Moody's Investors Service downgraded its outlook for Bank of America to ``negative,'' citing the bank's $100 billion in home equity loans.

Lewis has helped transform Bank of America since becoming CEO in 2001. The company spent about $25 billion this year to buy ABN Amro Holdings NV's LaSalle Bank in Chicago and U.S. Trust Corp. from Charles Schwab Corp. to increase Bank of America's retail banking and asset-management units.

No Recession

Reliance on consumer businesses became more important at Bank of America after profit at its corporate and investment banking division plummeted 93 percent to $100 million in the third quarter. Lewis replaced the division's leader and promised today to report within a month the results of his strategic review of the unit.

Lewis said he doesn't expect the U.S. economy to slip into a recession. The economy will grow at a rate of 1.5 percent to 2 percent next year, reflecting improvement in the second half, he said. ``However, we are closely watching the impact on consumers of the housing recession, higher energy costs and subprime loans,'' he said.

Last Updated: December 12, 2007 14:17 EST