Loan losses punish Bank of America's bottom line
The nation's second-largest bank, which lost $2.24 billion after accounting for preferred dividends, said its losses for failed loans came to almost $10 billion during the July-September period, up almost $1 billion from the second quarter. The bank also added $11.7 billion to its reserves to cover bad loans.
Bank of America's results were aided by profit from investment bank Merrill Lynch, including income from bond, stock and currency trading.
Its earnings follow the pattern set this week by Citigroup Inc. and JPMorgan Chase & Co., which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments. Both JPMorgan Chase and Goldman Sachs Group Inc. reported big gains from their trading operations.
Bank of America said it lost $2.24 billion, or 26 cents per share, after accounting for the preferred dividends of $1.24 billion. That compared with earnings of nearly $3 billion, or 39 cents per share, a year earlier.
The loss was 5 cents more per share than the 21 cents forecast by analysts surveyed by Thomson Reuters Inc. Investors sent Bank of America shares down 59 cents, or 3.3 percent, to $17.51 in premarket trading. Shares closed Wednesday at $18.10.
"Obviously, credit costs remain high, and that is our major financial challenge going forward," CEO Ken Lewis said in a statement accompanying the earnings report. "However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card numbers."
The bank, which being investigated by federal authorities for its Merrill acquisition, has received $45 billion in bailout funds as part of the Treasury Departments $700 billion financial rescue package. It's not known when it will repay the government.
Lewis, who is retiring at year's end, has agreed to give up his salary and other compensation for 2009.