By IEVA M. AUGSTUMS, AP Business Writer
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.
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.
Analysts on average expected a profit of 41 cents per share on revenue of $16.5 billion, according to Thomson Financial.
The bank's shares rose 4 cents to $38.60 in premarket trading.
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.
The credit crisis is also hobbling the value of many bank investments.
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.
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.
Bank
of America's chief executive, Ken Lewis, said in a statement that the
first-quarter results "clearly did not meet our expectations."
He added: "The weakness in the economy and prolonged disruptions in the capital markets took their toll."
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.
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."
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.
Bank of America said it "remains concerned" about the health of the consumer.
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.
Investment-banking profit plunged 92 percent on the write-downs as revenue fell 41 percent.
Results also included a $776 million gain from credit card network Visa Inc.'s initial public offering last month.
