Real Estate Lender Implosion

[up-down]

Bank of America 4Q Profits Plunge

By IEVA M. AUGSTUMS,
AP
Posted: 2008-01-22 08:54:26

CHARLOTTE, N.C. (AP) - Hurt by the deepening credit crisis, Bank of America Corp. said Tuesday its fourth-quarter earnings fell 95 percent, and Wachovia Corp. reported its earnings tumbled 98 percent.

Net income at Bank of America, the nation's largest consumer bank, dropped to $268 million, or 5 cents per share, in the three months ended Dec. 31 from $5.26 billion, or $1.16 per share, a year ago.

The bank's revenue fell 31 percent to $12.67 billion from $18.49 billion last year.

The quarter included results from LaSalle Bank, which Bank of America purchased on Oct. 1.

Analysts expected earnings of 18 cents per share on revenue of $13.24 billion, according to a poll by Thomson Financial. The earnings estimates typically exclude one-time items.

Bank of America shares fell $1.57 to $34.40 in premarket trading.

Crosstown rival Wachovia said its fourth-quarter profit fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, during the same period a year earlier.

Excluding merger-related expenses, Wachovia earned $160 million, or 8 cents per share, during the fourth quarter.

Analysts polled by Thomson Financial, on average, forecast earnings of 33 cents per share for the quarter.

Wachovia, the nation's fourth-largest bank, took a $1.7 billion write-down during the quarter due to weakening credit markets. Banks have been forced to reduce the value of bonds and debt backed by mortgages and other consumer loans that have increasingly defaulted in recent months.

Because of rising delinquencies and defaults, Wachovia also set aside $1.5 billion to cover losses.

Wachovia shares dropped 85 cents to $29.95 in premarket trading.

The news was the latest in a series of earnings declines among the largest U.S. banks as the nation's housing crisis and a slowing economy have forced many consumers to fall behind on their bills.

Last week, New York's Citigroup Inc., the No. 1 U.S. bank by assets, reported a nearly $10 billion loss, and JPMorgan Chase & Co., the third-largest U.S. bank, saw its profit fall 34 percent to $2.97 billion, or 86 cents per share. San Francisco's Wells Fargo & Co., the nation's fifth largest bank, reported that net income dropped 38 percent to $2.18 billion, or 64 cents per share.

Bank of America's results included $5.44 billion of trading losses, compared with profits of $460 million a year earlier. This reflected a $5.28 billion write-down related to collateralized debt obligations, which the bank said reduced trading profit by $4.5 billion and other income by about $750 million.

CDOs are complex investments that combine slices of different kind of risk and are often backed in part by subprime mortgages - loans given to customers with poor credit history - as well as other loans. In November, Bank of America executives estimated pretax CDO write-downs of at least $3 billion.

During the quarter, the company's provision for credit losses doubled to $3.31 billion from $1.57 billion a year ago. In the bank's consumer unit, which includes the nation's biggest credit card business and retail branch network, revenue rose 7 percent, while earnings dropped 28 due to higher credit costs.

"We certainly are not pleased with our performance," Chief Executive Ken Lewis said in a statement. "We are cautiously optimistic about 2008, though we believe economic growth will be anemic at best in the first half."

For the full year, Bank of America reported earnings of $14.98 billion, or $3.30 per share, compared with $21.13 billion, or $4.59 cents per share, in 2006. Wachovia earned $6.31 billion, or $3.31 per share, a 19 percent decline from the $7.79 billion, or $4.72 per share, earned during 2006.

http://money.aol.com/news/articles/_a/bank-of-america-4q-profits-plunge/n20080122085409990010