Bank of America quarterly profit down 77%
by Kay Murchie
Bank of America (BoA), the second-biggest bank in the US, posted an $8 billion (£4 billion) hit from the credit squeeze in the first 3 months of 2008, reducing its profit for the period by 77%.
Profit dropped for a third consecutive quarter and was below analysts predictions.
The bank, which has its headquarters in Charlotte, North Carolina, set aside $6.01 billion for bad loans, primarily relating to mortgages and second mortgages, as an increasing number of consumers and real estate developers failed to repay loans.
Kenneth Lewis, the bank’s chief executive, said we remain concerned about the health of the consumer given the prolonged housing slump, sub-prime issues, employment levels and higher fuel and food prices.
These results clearly did not meet our expectations. The weakness in the economy and prolonged disruptions in the capital markets took their toll on our performance, added Mr Lewis.
The bank posted a 59% decline in profits to $1.09 billion at its consumer and small business unit and a 92% fall to $115 million at its corporate and investment bank.
Approximately 50% of the bank’s home-equity loans are in Arizona, California, Florida and Nevada, where property prices are falling quicker than the national average.
BoA still anticipates completely its $4.1 billion purchase of Countrywide Financial Corp in the third quarter of 2008.
With regard to the purchase, the US Federal Reserve is today holding the first of three public hearings. Today’s hearing will take place in Chicago with the second and third hearings scheduled for April 28 and 29 in Los Angeles.
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