Bank of America tops forecasts - Capital Business
Connect with us

Hi, what are you looking for?

World

Bank of America tops forecasts

NEW YORK, July 18 – Bank of America said Friday it earned 3.2 billion dollars in the second quarter, down 5.9 percent from a year ago but better than most forecasts in the latest positive news for the ailing sector.

The largest US bank by assets said it paid preferred dividends of 805 million dollars including 713 million to the US government for its capital injections, part of a program to stabilize the financial system.

That left shareholders with a profit of 33 cents per share, better than market expectations of 28 cents per share.

Revenues rose 60 percent from a year ago to 33.1 billion dollars, lifted in part by the acquisition of Wall Street brokerage Merrill Lynch.

"Having positive net income in an extremely challenging environment speaks to the diversity and strength of our business model as well as the extraordinary effort put forth by all of our associates," said Kenneth Lewis, chief executive officer and president.

"Our goals during this difficult time have been to enhance the strength of our balance sheet and capital position and to continue to improve our earning power while dealing with the credit issues facing our industry due to the recession."

The bank based in Charlotte, North Carolina said results were driven by strong performance in capital markets and home loans, and helped by the sale of shares in China Construction Bank.

This was offset in part by high credit costs and losses linked to Merrill Lynch, the brokerage giant it rescued late last year in a deal brokered by US authorities.

Bank of America said it finished the second quarter with "its strongest capital position in recent memory," with a Tier 1 Capital ratio — a key measure of bank soundness — of 11.93 percent.

Advertisement. Scroll to continue reading.

While Bank of America joined JPMorgan Chase and Goldman Sachs in beating profit forecasts, the results were uneven when looking at various segments of the business.

Bank of America said declining home values and reduced spending by consumers and businesses "negatively impacted" its operations, resulting in more nonperforming loans.

It said commercial loan and real estate losses also rose from the prior quarter.

Its provision for credit losses was 13.4 billion dollars, unchanged from the first quarter but ut added to reserves for potential losses in consumer and commercial loans "reflecting the impact of the weak economy."

Douglas McIntyre at 24/7 Wall Street said the results at Bank of America were "remarkable" considering that it was "forced into a horrible deal to buy Merrill Lynch."

But he also noted that "the firm did indicate that credit quality continued to drop, a potential Achilles heel going forward."

Advertisement

More on Capital Business