Bank of America has reported a 95% fall in its fourth-quarter profit as a result
of write-downs and rising credit losses.
Net income at Bank of America fell to $268m in the last three months of 2007, from $5.26bn a year ago.
Net income at Bank of America fell to $268m in the last three months of 2007, from $5.26bn a year ago.
Earnings at the bank over the last quarter had fallen from $5.26 billion in 2006 down to $268 million, due to the growing requirement for writedowns and losses derived from devaluations of assets within the sub-prime sector.
Its results also included $5.44bn of trading losses, reflecting a $5.28bn write-down related to weakening credit markets.
"We certainly are not pleased with our performance," said chief executive Kenneth Lewis. Calling the last few quarters “the toughest environment since I have been C.E.O.,” who took the job in 2001.
Looking ahead to 2008, Lewis said he expected the company to report full-year earnings "well above" $4 a share, but warned that credit quality would remain a headwind in the coming year.
Mr. Lewis said he was cautiously optimistic about 2008, predicting economic growth would be positive, albeit “anemic,” in the first half of the year.
Even after writing down more than $5.28 billion in the value of the C.D.O. securities, the bank still has $8 billion of them, $4 billion of which are covered in some part by insurance.
During a conference call with analysts, Lewis said he was "comfortable" with the valuation of these mortgage-related securities, but ultimately left the door open to another writedown, saying their value was "subject to change."
On top of the troubling times, Bank of America recently agreed to purchase mortgage giant Countrywide Financial. If B of A gets the go-ahead from regulators, it would become the nation's largest mortgage lender by far -- which could end up being a windfall if and when the real estate market rebounds, or a nightmare if mortgage-backed debt continues to sour.
At the end of the year, Bank of America's so-called tier 1 capital ratio - a key measure of its ability to absorb losses - stood at 6.87 percent, down from 8.22 percent in the previous quarter and below its internal target level of 8 percent.
Lewis blamed the deterioration on the company's recent acquisition of LaSalle Bank and last year's lower profits, but said the company remained committed to maintaining its dividend and would look to raise capital through other means.
Its results also included $5.44bn of trading losses, reflecting a $5.28bn write-down related to weakening credit markets.
"We certainly are not pleased with our performance," said chief executive Kenneth Lewis. Calling the last few quarters “the toughest environment since I have been C.E.O.,” who took the job in 2001.
Looking ahead to 2008, Lewis said he expected the company to report full-year earnings "well above" $4 a share, but warned that credit quality would remain a headwind in the coming year.
Mr. Lewis said he was cautiously optimistic about 2008, predicting economic growth would be positive, albeit “anemic,” in the first half of the year.
Even after writing down more than $5.28 billion in the value of the C.D.O. securities, the bank still has $8 billion of them, $4 billion of which are covered in some part by insurance.
During a conference call with analysts, Lewis said he was "comfortable" with the valuation of these mortgage-related securities, but ultimately left the door open to another writedown, saying their value was "subject to change."
On top of the troubling times, Bank of America recently agreed to purchase mortgage giant Countrywide Financial. If B of A gets the go-ahead from regulators, it would become the nation's largest mortgage lender by far -- which could end up being a windfall if and when the real estate market rebounds, or a nightmare if mortgage-backed debt continues to sour.
At the end of the year, Bank of America's so-called tier 1 capital ratio - a key measure of its ability to absorb losses - stood at 6.87 percent, down from 8.22 percent in the previous quarter and below its internal target level of 8 percent.
Lewis blamed the deterioration on the company's recent acquisition of LaSalle Bank and last year's lower profits, but said the company remained committed to maintaining its dividend and would look to raise capital through other means.
No comments:
Post a Comment