The warning by Citigroup Inc analyst Keith Horowitz came amid reports that Citigroup itself might suffer a $10 billion operating loss for the quarter. Bank of America has many of the same kinds of market exposure as Citigroup -- such as through its credit card and investment banking operations as well as through holdings of complex debt.

Shares came under further pressure after CNBC television reported increased friction between Chief Executive Kenneth Lewis and former Merrill Lynch Chief Executive John Thain, who is now Bank of America's head of global banking, securities and wealth management. The TV network said this could jeopardize Thain's prospects of eventually succeeding Lewis, who is 61. Bank of America bought Merrill on January 1.

Bank of America did not immediately return a call seeking comment.

In afternoon trading, Bank of America shares were down $1.45 at $11.54 on the New York Stock Exchange. The bank is a Dow Jones industrial average <.DJI> component. The Dow industrials shed 1.6 percent in afternoon trading.

Horowitz expects Bank of America to have a fourth-quarter loss of 75 cents per share, compared with his earlier estimate for a profit of 2 cents per share. He also lowered his 2009 profit forecast to 25 cents per share from $1.75.

Analysts, on average, expected a quarterly profit of 21 cents per share, according to Reuters Estimates.

Horowitz also said the bank might lower its quarterly dividend to 5 cents per share from 32 cents. The bank halved its dividend last October.

Bank of America raised $10 billion in a share sale last October, and subsequently received $25 billion from the U.S. Treasury Department's Troubled Asset Relief Program (TARP).

Horowitz said the bank may have recorded only one-third of losses that could potentially total $165 billion between 2008 and 2011.

Bank of America is one of the world's largest credit card issuers, and became the largest U.S. mortgage lender when it bought Countrywide Financial Corp in July.

"Investors should be braced for a very challenging fourth quarter," Horowitz wrote. But he said the TARP infusion should allow the bank to avoid having to raise new capital now, though a capital raising could take place in two to five years.

Horowitz rates Bank of America shares as "buy" with a $22 price target, saying the stock has "excellent long term value."

(Reporting by Jonathan Stempel; editing by Jeffrey Benkoe)