Ouch

Bank of America Profit Falls, Hurt by Credit Losses
BANKS, FINANCIAL SERVICES, EARNINGS
By ReutersReuters
| 22 Jan 2008 | 07:30 AM ET
Bank of America, the second-largest U.S. bank, said on Tuesday fourth-quarter profit sank 95 percent, hurt by more than $7 billion of losses tied to poor trading decisions and mounting credit woes.


Net income for the Charlotte, North Carolina-based company fell to $268 million, or 5 cents per share, from $5.26 billion, or $1.16, a year earlier.

Analysts on average expected a profit of 19 cents per share, according to Reuters Estimates.

Results reflected $5.44 billion of trading losses, compared with a year-earlier $460 million profit. 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.

Bank of America also set aside $1.74 billion for credit losses, including a $1.33 billion addition to reserves.


"We certainly are not pleased with our performance," Chief Executive Kenneth 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."

It 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 lead to a growing number of consumers falling behind on their bills.

Bank of America shares closed Friday at $35.97 on the New York Stock Exchange. Through Friday, they had fallen 33 percent in the last year, compared with a 34 percent drop in the Philadelphia KBW Bank Index.

Copyright 2008 Reuters. Click for restrictions.
URL: http://www.cnbc.com/id/22778459/

 

Wachovia Profit Falls, Hurt by Writedowns
BANKS, FINANCIAL SERVICES, EARNINGS
By ReutersReuters
| 22 Jan 2008 | 09:18 AM ET
Wachovia, the fourth-largest U.S. bank, on Tuesday said quarterly profit fell a larger-than-expected 98 percent, hurt by a surge in bad loans and credit losses amid mortgage and capital markets turmoil.

The bank, whose shares fell 4.4 percent in pre-market trading, said fourth-quarter net income fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, a year earlier.

Excluding merger costs, profit was $160 million, or 8 cents per share, the bank said.

On that basis, analysts on average expected profit of 32 cents per share, according to Reuters Estimates.

Results reflected $1.7 billion of losses related to structured products including collateralized debt obligations. This included losses of $1 billion tied to subprime mortgages, $600 million for commercial mortgages, and $123 million for other consumer mortgages.

The Charlotte, North Carolina-based bank also set aside $1.5 billion for credit losses, up sevenfold from $206 million a year earlier, and more than triple the third quarter's $408 million.

Net charge-offs totaled $461 million, up from $140 million a year earlier and $206 million in the third quarter. Nonperforming assets soared 74 percent in the October-December period, to $5.1 billion from $2.93 billion.

"Continued turmoil in the capital markets and the dramatic change in the credit environment diminished our fourth-quarter results substantially," Chief Executive Ken Thompson said in a statement.

Golden West Drags

Some of the losses were attributable to the former Golden West Financial Corp, a California mortgage specialist that Wachovia bought in Oct 2006 for $24.2 billion, an amount critics called too high.

Profit in consumer and business banking, Wachovia's largest unit, fell 18 percent to $1.24 billion. Corporate and investment banking posted a $596 million loss, compared with a year-earlier $670 million profit.


Profit rose 42 percent in capital management to $350 million, and rose 1 percent in wealth management to $85 million.

In October, Wachovia completed its acquisition of St. Louis-based A.G. Edwards Inc for roughly $6.4 billion, creating the second-largest U.S. retail brokerage.

Lending income rose 1 percent to $4.67 billion, though net interest margin fell to 2.88 percent from 3.09 percent a year earlier, and from 2.92 percent in the third quarter. Fee income and other income fell 37 percent to $2.53 billion.

Wachovia shares fell $1.34, or 4.4 percent, to $29.50 in pre-market electronic trading.

Shares closed Friday at $30.80 on the New York Stock Exchange. Through Friday, they had fallen 45 percent in the last year, compared with a 34 percent drop in the 24-member Philadelphia KBW Bank Index.

Copyright 2008 Reuters. Click for restrictions.
URL: http://www.cnbc.com/id/22778456/

 

http://www.chron.com/disp/story.mpl/ap/fn/5475112.html

Wachovia's rating lowered to negative.

 

First Union/Wachovia should just stop doing mergers/acquisitions. It isn't very good at them.

 

Yep. That West merger is wreaking havoc all over them.

 

There goes your 401K match.

 

401(k) match probably not. Bonuses, probably so.

 

I didn't think it was possible for them to pull another CoreStates. Hopefully West won't be that bad, but knowing them, it will.

 

stock went up today

 

Investors are banking on the stimulus package to be dumped into mortgages. Our system is built on growing credit, not exports. The Fed lowering the interest rate and next week's expected drop again will make it easier for people to refi their mortgages postponing again the inevitable. Eventually we can't lower the interest rate any more.

That's the way I've heard it explained. I don't think anyone really knows yet.