Bank of America Corp., the second- largest U.S. bank, plans to cut back investment banking after about $4 billion in trading losses, defaults and writedowns caused third-quarter profit to drop 32 percent, more than analysts estimated.

Net income fell to $3.7 billion, or 82 cents a share, according to a company statement, missing the $1.06 a share average estimate from 16 analysts surveyed by Bloomberg. The Charlotte, North Carolina-based company set aside $2.03 billion in the quarter to cover bad loans amid the worst U.S. housing slump in 16 years.

Bank of America declined 2.4 percent to $48.85 in New York trading after Chief Executive Officer Kenneth Lewis called the results unacceptable. Lewis said during a conference call that the company plans to curtail investment banking after trading mistakes led to $717 million of losses. [MORE]