Bank of America Earnings Plunge 77%

123jump.com Staff
21 Apr, 2008
New York City

Bank of America earnings in the first quarter declined 76% to $1.21 billion from $5.26 billion on revenue decline of 6% to $17.30 billion. The bank provisioned $6.01 billion compared to $4.78 billion a year ago on rising trading losses and growing non-performing assets. Nonperforming assets were $7.83 billion, or 0.90 percent, of total loans, leases and foreclosed properties at quarter-end compared to $5.95 billion, or 0.68%, at December 31, 2007 and $2.06 billion, or 0.29%, at the end of Q1.

[R][8:00AM New York – Bank of America first quarter earnings plunges 76%.[/R]

Bank of America reported first quarter earnings declined 76% to $1.21 billion from $5.26 billion from a year ago. Diluted earnings per share plunged 80% to 23 cents from $1.16 in the previous year.

Loan losses on the rise

Provision expense increased by $4.78 billion from a year-ago, to $6.01 billion due to rising credit costs - particularly in the home equity, small business and homebuilder portfolios - including a $3.30 billion increase to the reserve.

Trading-related losses were $1.31 billion compared with income of $1.66 billion a year earlier, driven primarily by $1.47 billion in write downs of collateralized debt obligations (CDOs) and $439 million in write downs of leveraged loans. Trading-related losses were $5.15 billion in the fourth quarter of 2007, which included CDO-related write downs of $5.28 billion.

Nonperforming assets were $7.83 billion, or 0.90 percent, of total loans, leases and foreclosed properties at quarter-end compared to $5.95 billion, or 0.68 percent, at December 31, 2007 and $2.06 billion, or 0.29 percent, at March 31, 2007. Results for the period ended March 31, 2007 do not include LaSalle.

The allowance for loan and lease losses was $14.89 billion, or 1.71%, of loans and leases measured at historical cost, at March 31, 2008. That compared with $11.59 billion, or 1.33%, at December 31, 2007 and $8.73 billion, or 1.21%, at March 31, 2007 excluding the recent LaSalle acquisition.

Revenues declined

Revenue net of interest expense on a fully taxable-equivalent basis declined 6 percent to $17.30 billion from $18.48 billion in the first quarter a year earlier.

Net interest income on a fully taxable-equivalent basis rose 20% to $10.29 billion from $8.60 billion in the first quarter of 2007 on strong loan growth, an increase from market-based net interest income and LaSalle acquisition.

The increase was partially offset by higher funding costs. The net interest yield improved 12 basis points to 2.73%.

New checking account additions

Total retail sales increased 10 percent to 13 million products, driven by strong growth in checking and savings, debit and online banking. Net new retail checking accounts grew 14% or by 557,000.

Total average retail deposits increased or 11% to $51 billion. Direct-to-consumer mortgage originations in the quarter rose 32%. Business lending, a unit within global corporate and investment banking, had organic loan growth of 11%. Within global wealth and investment management, loans rose 30% and deposits increased 29%. Total assets under management increased to more than $607 billion.

The $0 online equity trades, online brokerage business added more than 20,000 net new self-directed accounts. Mobile Banking recorded approximately 224,000 activations reaching 840,000 active customers. Keep the Change, an initiative sold to save transaction costs on debit and credit card reached 8 million net new enrollments since inception, with 974,000 customers alone signing up in the first quarter.

Views on the economy and outlook for 2008

Kenneth D. Lewis, chairman and chief executive said, “We remain concerned about the health of the consumer given the prolonged housing slump, subprime issues, employment levels and higher fuel and food prices.”

Bank of America keeps the dividend

Total shareholders'' equity was $156.31 billion at March 31. Period-end assets were $1.74 trillion. The Tier 1 Capital ratio was 7.51%, up from 6.87% at December 31, 2007 after the company raised about $13 billion in capital through the issuance of preferred stock in January.

The Tier 1 ratio was 8.57% in the year ago quarter.

Bank of America paid a cash dividend of $0.64 per share in the quarter. The company also issued about 15 million common shares primarily related to restricted stock activity and did not repurchase any shares.

Bank of America stock ((BAC)) in the last one week has traded between $54 and $33 and closed on Friday in regular hours of trading at $38.70.