BofA hit by writedowns and credit costs

Financial Times ^ | 4/21/08 | Ben White

[kiriath_jearim]

Bank of America, slammed by writedowns and rising credit costs, on Monday said earnings dropped nearly 80 per cent in the first quarter to $1.2bn.

The largest US bank by market value said provision for credit losses soared by $4.78bn to $6.01bn, driven by problems in home equity and small business loans as well as loans to homebuilders.

The bank had $1.47bn in writedowns on its collateralised debt obligations and $439m on its leveraged loan commitments. The numbers were down significantly from the fourth quarter, in which BofA had $5.15bn in writedowns leading executives at the bank to stage a sharp pullback from the investment banking business.

Overall, BofA said it earned $1.21bn, or 23 cents a share, down from $5.26bn, or $1.16, last year. The figures fell short of analyst estimates of a profit of 41 cents a share. Net revenue dropped 6 per cent to $17bn.

”Despite revenue growth in most of our businesses, these results clearly did not meet our expectations,” Ken Lewis, chief executive, said in a statement. ”The weakness in the economy and prolonged disruptions in the capital markets took their toll on our performance.”

BofA is sitting on large paper gains from in its investment in China Construction Bank and has said it may sell some of the holding and book profits.

BNP Paribas is in advanced talks to buy BofA’s equities prime brokerage unit in a move that would enable BofA to scale down its investment banking business, and would boost the French group’s presence in the US.

Mr Lewis had indicated that BofA was looking to reduce its investment banking business last year.

Like many of its rivals, BofA’s investment bank has been hit by the credit crisis and US housing meltdown and, after poor third-quarter results, Mr Lewis said he had endured all the “fun” he could handle in investment banking. The chief executive later said he regretted the comment.

The bank’s shares fell 67 cents to $37.89 in pre-market trading.

[pnh102]

These were the same jerks who lend money to illegals. I am glad I canceled my credit card account with them. I know, that in a very small, small, minuscule way, by not paying one red cent of interest to Bank of “America,” I helped. :)

[RebelBanker]

Tough market out there! The bank I work for reported lower earnings this quarter, but did not get pounded as bad as some of our competitors. Fortunately for us, our CEO never liked subprime paper so we would not originate or hold any - that was the difference between a profit and a loss.

Lots of banks followed the herd mentality into mortgages that should have never been made and are now paying the price. Unfortunately, just as a rising tide lifts all ships, an ebbing one lowers them all.

[GOPPachyderm]

I cancelled my card too when I heard about their policy of banking accounts to undocumented aliens.

[goodnesswins]

We’re looking for a new bank....maybe we should consider yours?

[pepsionice]

The minute they brought up the idea of handling money for illegals...you could see warning signs. A bank that desperate....to lose its base of old customers...is in trouble. I’ll bet most of the middle management of the bank...have their resumes out on the street and looking for a new organization.

[mdittmar]

Time to buy,not BOA,just move money into the market.

[The Magical Mischief Tour]

Just reaping what they have sowed. They made these loans to these folks, under questionable terms now they are paying the price.

Screw’em!

[SierraWasp]

I almost left B of A in the early 1980's when they'd loaned Mexico so much money they didn't have any left to help me with a business equipment loan.

Then I did leave them in the early 1990's when they kept making me walk around their ridiculous "don't bungle the jungle" EnvironMental exhibit in the middle of the bank.

I asked 'em if it was put there to slow down the escape route of any robbers, or what. Then I closed all my accounts and didn't even waste an explanation on 'em!!!

[mdittmar]

Yes they are,time to buy,not BOA,if you have money on the sidelines move it into the market.

[tubebender]

I almost left B of A in the early 1980's when they'd loaned Mexico so much money they didn't have any left to help me with a business equipment loan.

That caper cost them my accounts that I had there. I wanted to borrow for new construction of a commercial building and they kept putting up obstacles including all my life insurance. I went to a startup bank and got the loan and paid it off early from the rental income...

[D Rider]

BofA made the brilliant move of increasing the interest rate of their CC’s to a punitive 25% or so. I am sure that this caused many to move their CC debt. So instead of getting their 15+% every month... well what can I say, heck of a way to survive in a cash flow business.

[Kimberly GG]

Illegal Immigrants, the Face of the Subprime Mortgage Crisis

.....”Despite the rising economic crisis, the mainstream media has still not begun to investigate the apparent link between illegal immigration and the mortgage crisis. Instead they hold out hopes that the Federal Reserve will bail us out by cutting interest rates.”

http://undocumentedblogger.blogspot.com/2007/08/illegal-immigrants-face-of-subprime.html

Mortgage defaults force out (ILLEGAL?) immigrant families

http://www.libertypost.org/cgi-bin/readart.cgi?ArtNum=182104

Hannie Mae - Formalizing Lending To Illegal Aliens

http://www.therealestatebloggers.com/2007/10/09/hannie-mae-formalizing-lending-to-illegal-aliens/

Stock market and mortgage woes connected to illegal aliens?
Subprime Mortgage Defaults Being Driven by Illegal Immigration?

http://undocumentedblogger.blogspot.com/2007/08/subprime-mortgage-defaults-being-driven.html

[cherry]

I didn’t cancel my card, but I got a card with them that had a year of no interest on balance transfers...so I am screwing them......LOL

[Jimmy Valentine]

I'm in the game too on the C&I side. Down here in Maryland, the mortgage banking side of a bunch of banks is taking on water. Our guys were all commission men, and we have lost most of them. They can't get a deal done.

There are going to be a whole bunch of series three BMW's going off lease cheap.

[Grampa Dave]

We were with B of A a few days or hours and didn’t know it during the Security Pacific buyout, roll over and eventually being bought out by USB, which has been good.

We know a fellow, who is back with B of A for the third time as a mortgage guy. His boss was complaining a few months ago she couldn’t find enough high quality mortgage people to handle the local demand and hired him back from Countrywide.

One of our younger relatives, who has a beat me syndrome been with B of for over a decade and has problems all the time and stays with them because they stuck with him during some rough financial times for him. Of course they charged him an arm and a leg for services rendered during his tough times.

[SierraWasp]

Well, B of A was good to me when I first came to CA in 1964! So I was gonna stick with 'em, too!! But then they pist me off!!! (way, WAY OFF!!!)

I just moved my "cash" to Charles Schwab Bank checking which is paying pretty high interst, considering. Plus, it's quick and easy to move some of it over quickly to the brokerage account for moving in back into the market. The "bank" account is FDIC insured. The brokerage cash account isn't.

Whatever... the actual "bank" is over in Reno and all the "banking" is done on-line. I also keep an account at Scottrade for buying IPO shares since Schwab won't let me unless I do $100K. Phoey on that idea!!! My "V" is sure doing well and my "MA" doubled a couple of times causing me to "profit take" twice and thus, clear out of it!!!

[tubebender]

I still have some of my parents Bank of Italy statements and then the change over when A.P. changed the name to Bank of America soon after that.

[SierraWasp]

You need to git those on that PBS antique show and get ‘em appraised!!! I’ll bet those historic documents are worth MONEY!!!

[RebelBanker]

“We’re looking for a new bank....maybe we should consider yours?”

Thanks for the sentiment, but I am afraid we are on opposite coasts. According to your profile, you are in Washington State. The bank I work for has offices from New England to Virginia and west to Ohio.