Bank of America (NYSE:BAC) on Friday said it suffered a $1.0 billion net loss, or 26 cents per share, in the latest quarter, as a result of a continued weakness in the U.S. and global economies and stress on the consumer, which continues to translate into high credit costs. Those results compare with net income of $1.2 billion, or 15 cents per share, during the year-ago period.
Contributing to the negative third-quarter performance of the nation’s largest lender, which has received two taxpayer bailouts totaling $45 billion, was a $1.2 billion dividend payment to its preferred shareholders, and a $893 million dividend payment the bank made to wean itself off government life support. When those dividends are all included, the loss was $2.24 billion. The Charlotte, N.C.-based lender also paid in the quarter $402 million in pretax charges to the U.S. government after agreeing to extract itself from an agreement with the regulators that guaranteed potential losses of its brokerage Merrill Lynch.
The bank also took punishment during the quarter from credit losses within some of its consumer-related businesses. BofA’s global card services division made a $1 billion loss due to lower fee income, and home loans and insurance made a $1.6 billion loss. Nonperforming assets — loans at least 90 days overdue — increased to $33.8 billion, or 3.72% of outstanding loans, leases and foreclosed properties, from $31 billion, or 3.31%, quarter-over-quarter basis. The bank suffered $9.6 billion in credit losses in the quarter and said it has set aside $11.7 billion in the 3Q to cover expected loan losses, which compares with $13.4 billion in the 2Q.
“Obviously, credit costs remain high, and that is our major financial challenge going forward,” the outgoing bank’s chief executive, Ken Lewis, said in a statement. “However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card numbers.”
Revenues at BofA also failed to meet expectations, although the $26.4 billion (from $19.9 bln a year ago) was 32.6% higher on a year-over-year basis. Analysts were expecting $27.6 billion. Meanwhile, non-interest expenses climbed 39% to $16.3 billion, due largely to higher personnel costs.
BofA’s first quarterly loss was slightly worse than Wall Street was expecting. Analysts had anticipated that the company would suffer a loss of 21 cents per share, according to Thomson Reuters (NYSE:TRI).
Bank of America’s earnings cap a week when other big US banks beat profit expectations, led by JP Morgan (NYSE:JPM), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C).
Shares of BofA are currently down 76 cents, or -4.03%, to $17.37 in NYSE trading. The bank’s stock price has climbed more than 400% since falling to $3 a share in March.
Any business that’s hemorrhaging this kind of money would be looking for anyway to combat it. Cutting corners or smudging the ethical grey area boundary, might seem like a perfectly reasonable option when your losing billions of dollars.
As much as I understand though, I certainly don’t condone most of what Bank of America’s been doing. I might be more understanding if this thing carries on for awhile, but this has not been an ongoing issue. For the first two quarters of this year Bank of America had big time profits. So nobody should really be crying all that much for the poor folks at Bank of America.
I know some people out there are going to be happy about these losses for Bank of America. That feeling of they got what they deserve might make you feel better in the short term, but the long term ramifications of these losses are something that’s not going to make consumers happy. Elevated risk = elevated interest rates for all of us. Honorable creditors are going to end up paying for the people that have not been able to pay their money back. So as much as it pains me to say it, I have to hope that these losses do not continue for Bank of America. They may be bastards, but we sure do need them.
Check out my blog on BofA’s 3rd quarter earnings report at….. http://www.thedebtgazette.com/2009/10/bank-of-america-3rdquarter-losses/