June 11 (Bloomberg) -- Bank of America Corp. won't rule out a possible cut in the company's 8.8 percent dividend and said Oppenheimer & Co. erred by reporting Chief Executive Officer Kenneth Lewis considers the payout safe.

Lewis expects the U.S. economy won't deteriorate significantly, enabling the bank to continue paying its 64-cent per share quarterly dividend, spokesman Robert Stickler said today. If the economy does weaken, Lewis believes the bank may consider reducing the dividend, he added.

Oppenheimer analyst Meredith Whitney wrote in a report today that ``Bank of America views the dividend as safe and is comfortable with a higher than normal payout ratio,'' citing a dinner meeting discussion yesterday with Lewis. Bank of America, the second-largest U.S. bank by assets, pays a 64-cent per share quarterly dividend and hasn't cut the payout since its 1998 merger with NationsBank Corp.

``Ken never said the dividend is safe,'' Whitney said in an interview today. ``We left the dinner feeling that they had a lot more flexibility. We believe the dividend is safe.''

Bank of America fell 67 cents to $28.95 at 3:41 p.m. in New York Stock Exchange trading, its lowest level since October 2002.

Whitney was among the first U.S. bank analysts to predict the depth of the U.S. credit crisis and last year correctly predicted that Citigroup, the largest U.S. bank by assets, would cut its dividend. On June 9 she warned that ratings downgrades of bond insurers Ambac Financial Group Inc. and MBIA Inc. could lead to more than $10 billion of additional writedowns at Citigroup, Merrill Lynch and UBS AG.

Earnings Outlook

Charlotte, North Carolina-based Bank of America probably will earn $2.50 per share this year, less than the company's annualized dividend rate of $2.56, according to Whitney's estimate. The bank can raise capital by selling part of its stake in China Construction Bank, Whitney said. The shares have jumped fivefold since Bank of America invested $3 billion three years ago for a 9 percent stake.

``Mr. Lewis went through a number of scenarios and indicated that we feel the most likely scenario is one in which the economy does not deteriorate significantly,'' said Stickler, who attended the meeting with Whitney. ``In that scenario, we wouldn't have to cut the dividend.''

Lewis said the rate of late payments on credit cards and home loans declined ``fairly substantially'' from April to May and was a hopeful sign for the biggest U.S. retail bank, according to Whitney. Lewis cautioned it was just one month of data, according to Whitney's report.

Countrywide Financial

The bank is the biggest home-equity lender according to Fitch Ratings and it will become the biggest mortgage company in July, after completing its purchase of Countrywide Financial Corp. The company says it has the leading market share in credit- card lending in the U.S. and Europe. Fewer late payments reduce the risk of loan losses, which have contributed to three straight quarters of lower profits at the bank.

Lewis, at a conference in New York today, reiterated support for the Countrywide deal. The purchase is still a ``good financial transaction even if we're off by a billion or two,'' Lewis said at the meeting hosted by the Wall Street Journal. The deal ``is still the right thing to do.''

Bank of America agreed in January to buy Countrywide for about $4 billion in stock. The bank faces $20 billion to $30 billion in additional loan losses at Countrywide, Paul Miller, an analyst at Friedman Billings Ramsey Group, said in a May 5 report. Countrywide is hurt by declining housing prices in California and Florida, where the lender does about half its business, Miller said.

Late payments on Countrywide's loans jumped to 4.6 percent as of March 31, up from 3 percent in the previous quarter. The rate of delinquencies for an adjustable-rate mortgages that gives borrowers the option of not making an interest payment, rose to 9.4 percent from 5.7 percent.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: June 11, 2008 15:45 EDT