Thread: Bank of America posts profit, surprises investors

Bank of America posts profit, surprises investors


By IEVA M. AUGSTUMS
AP Business Writer
Monday, April 20, 2009


CHARLOTTE, N.C. – Bank of America Corp. managed to avoid a loss in the first quarter, surpassing analysts' expectations and providing further evidence the banking sector might be improving.

But the bank also took a hefty $13.4 billion provision for loan losses and its shares fell 55 cents, or 5.2 percent, to $10.05 in premarket trading.

The Charlotte, N.C.-based company earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.

The higher-than-expected earnings could take some pressure off Chief Executive Ken Lewis who has faced calls from some shareholders to either give up his job as chairman or be ousted.

Lewis has faced intense pressure this year over the Merrill purchase, which closed Jan. 1. Shareholders approved the deal before learning of big losses at the New York-based investment bank that prompted a government bailout.

The results include higher revenue from the company's acquisitions of Merrill Lynch & Co. and Countrywide Financial Corp., which Bank of America did not own last year.

However, Bank of America recorded a $13.4 billion loan-loss provision in the first quarter, showing that it is not immune from deteriorating credit quality and growing unemployment. The bank set aside $6.4 billion as additional reserves to cover future losses.

"We understand that we continue to face extremely difficult challenges," Lewis said in a statement.

Bank of America's better-than-expected profit is the latest in a string of bank earnings that have beat expectations, including JPMorgan Chase and Citigroup.

Bank of America has received $45 billion in government funds as part of the Treasury Department's $700 billion financial rescue package.

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Bank of America profit rises, credit quality sours


NEW YORK (Reuters) – Bank of America Corp on Monday disappointed investors by reporting a big increase in troubled loans, even as its purchase of Merrill Lynch & Co helped first-quarter profit more than double.

While results topped analysts' forecasts, they were bolstered by one-time events, including a $1.9 billion gain from selling shares of China Construction Bank Corp and $2.2 billion of gains tied to widening credit spreads. Nonperforming assets, meanwhile, totaled $25.74 billion, up 41 percent from year-end.

Shares of Bank of America fell 5.7 percent to $10.00 in premarket trading.

The results are unlikely to stem calls for Chief Executive Kenneth Lewis to be ousted or to give up the post of chairman of the largest U.S. bank, which has taken $45 billion of federal bailout money.

"I don't see anything that makes me think all of a sudden people are going to take the pressure off Lewis," said Walter Todd, a portfolio manager at Greenwood Capital Associates LLC, which invests $650 million and owns Bank of America shares. "The biggest question I have is, what is going on with these nonperforming assets?"

Net income applicable to common shareholders of Charlotte, North Carolina-based Bank of America rose to $2.81 billion, or 44 cents per share, from $1.02 billion, or 23 cents, a year earlier. Net revenue more than doubled to $35.76 billion.

Excluding items, profit was 17 cents per share, according to Reuters Estimates, compared with analysts' average forecast of 4 cents.

Before the impact of preferred stock dividends, net income more than tripled to $4.25 billion from $1.21 billion.

PRESSURE

Lewis faces intense pressure over the Merrill purchase, which shareholders approved before learning of big losses at Merrill that would prompt a government bailout.

Bank of America has also infuriated regulators over its handling of $3.62 billion of bonuses awarded to Merrill workers, and the bank's share price has fallen by more than two-thirds since the merger was announced in September.

The bank also faces a slew of investor lawsuits over its purchases of Merrill and the mortgage lender Countrywide Financial Corp.

Credit quality deteriorated broadly as the economy weakened, housing prices fell and unemployment rose.

Bank of America set aside $13.38 billion for credit losses in the quarter, up from the fourth quarter's $8.54 billion. Net charge-offs totaled $6.94 billion.

The bank's credit card business lost $1.77 billion in the quarter as the rate of managed credit card net losses rose to 8.62 percent from 7.16 percent at year-end.

"We continue to face extremely difficult challenges, primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment," Lewis said.

Mortgage and home equity loan production rose 79 percent from the fourth quarter to $89.26 billion. But this suggests a loss of market share to Wells Fargo & Co despite the acquisition of Countrywide. Wells Fargo reported more than $100 billion of mortgage loans in the first quarter.

Profit in the investment bank totaled $2.37 billion, compared with a year-earlier $991 million loss, fueled primarily by $4.92 billion of trading profits. Wealth management profit more than doubled to $510 million.

Lewis previously said Bank of America was profitable in January and February, causing analysts to boost their forecasts. In the October-to-December period Bank of America had its first quarterly loss in 17 years.

Bank of America shares closed Friday at $10.60 on the New York Stock Exchange. Through Friday, the shares had fallen 24.7 percent this year, compared with a 16.1 percent decline in the KBW Bank Index.

(Reporting by Jonathan Stempel and Elinor Comlay; Additional reporting by Dan Wilchins; Editing by Derek Caney and John Wallace)

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