Bank of America Posts Disappointing Income

[Feb 1, 2008.]

 

Corporate titan Bank of America is apparently falling on tough times.

The mega-corporation reported quarterly earnings that disappointed Wall Street investors. After release of the news, Bank of America stock fell more than 5%.

The company's net income plummeted 95% to $268 million. Meanwhile, revenue dropped 31% to $12.67 billion over the course of the year. Investors had expected the North Carolina-based company to report a profit of 18 cents per share with revenue of $13.24 billion.

In a prepared statement, Bank of America's Chairman and CEO, Kenneth Lewis, said, "Our fourth-quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy…Even given that environment, we certainly are not pleased with our performance."

Bank of America escalated its loan loss provisions by $1.33 billion during the quarter. That was the apparent result of increasing credit expenses, especially in the areas of home equity, homebuilding, and small business.

However, Bank of America is not alone in its earnings woes. A number of companies have also reported significant losses, including Citigroup, Merrill Lynch, and Washington Mutual. The losses all appear to stem from the ongoing credit controversy.

Meanwhile, the nation's housing market is experiencing its worst crisis in 16 years. Many would-be homebuyers are having a tough time securing loans because of tighter standards being invoked by mortgage companies. The stricter guidelines follow the subprime loan debacle, which resulted in defaults and delinquencies nationwide. Subprime loans are those loans which are extended to homebuyers with shaky credit histories.

Home sales have fallen dramatically, as have home prices. While some analysts say the housing market could recover as early as the middle of this year, others are not so optimistic. They say it may be 2010 before the housing market regains its financial footing. As a result of the crisis, the economy has emerged as the key issue in the Presidential race.

Julie Ann Amos
Febraury 1st 2008

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