Bank of America's profit drops 77 percent in first quarter
By IEVA M. AUGSTUMS, AP Business Writer<br><br><p>CHARLOTTE, N.C. - Bank of America Corp. said Monday its profit fell
77 percent in the first quarter, hurt by trading losses and a $3.3
billion increase in reserves for problem loans.</p><p>The
Charlotte-based bank, set to acquire troubled subprime mortgage lender
Countrywide Financial Corp. later this year, reported earnings of $1.21
billion, or 23 cents per share, on $17 billion in revenue. That
compared with net income of $5.26 billion, or $1.16 a share, a year
earlier on $18.16 billion in revenue.</p><p>Analysts on average expected a profit of 41 cents per share on revenue of $16.5 billion, according to Thomson Financial.</p><p>The bank's shares rose 4 cents to $38.60 in premarket trading.</p><p>Major
national banks like Bank of America continue to be besieged on two
sides: The bread-and-butter banking business is struggling because of
the slumping housing market. With home prices flagging, more people and
real estate developers are failing to repay their loans.</p><p>The credit crisis is also hobbling the value of many bank investments.</p><p>Last
week, crosstown rival Wachovia Corp. said it lost $393 million in the
first quarter because of bad credit and tumultuous financial markets.
Washington Mutual Inc. lost $1.1 billion.</p><p>Wells Fargo & Co.'s
profit fell 11 percent, JPMorgan Chase & Co.'s profit slid 50
percent, and Citigroup Inc. posted a loss of $5.1 billion.</p><p>Bank
of America's chief executive, Ken Lewis, said in a statement that the
first-quarter results "clearly did not meet our expectations."</p><p>He added: "The weakness in the economy and prolonged disruptions in the capital markets took their toll."</p><p>Results
included $1.31 billion of trading losses compared with income of $1.66
billion a year earlier. This was driven primarily by $1.47 billion in
write-downs of collateralized debt obligations, a security often backed
by subprime mortgage loans, and $439 million for loans to fund
leveraged buyouts. Trading losses were $5.15 billion in the fourth
quarter of 2007.</p><p>Bank of America said the $3.3 billion increase
in reserves was part of a $4.78 billion increase in provisions, to
$6.01 billion, "due to rising credit costs _ particularly in the home
equity, small business and homebuilder portfolios."</p><p>Net
charge-offs, loans it doesn't think are collectable, jumped to $2.72
billion, up from $1.43 billion a year ago, reflecting housing market
deterioration and slowing economic conditions, the company said.</p><p>Bank of America said it "remains concerned" about the health of the consumer.</p><p>In
the bank's consumer unit, which includes the nation's biggest credit
card business and retail branch network, revenue rose 17 percent, while
earnings dropped 59 percent due to increased credit costs.</p><p>Investment-banking profit plunged 92 percent on the write-downs as revenue fell 41 percent.</p><p>Results also included a $776 million gain from credit card network Visa Inc.'s initial public offering last month.</p><br>