Following its second quarter net profit of $3.2 billion, as noted by the BBC
, and higher-than-expected third quarter profits from U.S. banks such as JPMorgan Chase, Goldman Sachs and Citigroup, there may have been expectations in some quarters that the results for the three months to September for Bank of America would provide further evidence of an economic recovery.
However, as AFP
reports, whilst confirming a "leveling of delinquencies among our credit card customers", Bank of America, whose Chief Executive Kenneth Lewis leaves the organization at the end of the year and was making his last presentation of the quarterly results, when announcing its loss for the third quarter conceded that its results were "negatively impacted by continued weakness in the US and global economies and stress on the consumer, which continues to result in high credit costs".
The London Times
provided details of the specific areas within Bank of America's operations that had contributed significantly to the loss, which for shareholders actually came in at $2.24 billion, in the period July through September. Those areas include net income from deposits falling by 40 percent from quarter three in 2008 to $798 million, global card services losing $1 billion, a loss of $1.6 billion for home loans and insurance, and the payment of special dividends worth $1.2 billion.
Of the amount paid out in special dividends $893 million went to the U.S. government in respect of the capital injections received by Bank of America. A further $402 million has been set aside, or has possibly already been paid, to end a government guarantee on the bank's assets.
Furthermore there was a $2.6 billion charge relating to write-downs on assets, not just from Bank of America but also from Merrill Lynch, the financial services firm whose acquisition by the bank was announced in September 2008 and was completed on January 1 2009.
On the positive side the size of the charge relating to write-downs was, says the London Times
, a reflection of Bank of America's improved creditworthiness.
Also on the positive side net income from global markets exceeded $2 billion, a loss was reported from those markets during quarter three in 2008, and year-on-year revenue increased in the quarter by more than 32 percent to over $26 billion.
Bank of America, which acquired the lender Countrywide Financial in July 2008, has yet to pay back the U.S. government for the bailout funds it received. Those funds totaled $45 billion, some of which were received in order to facilitate the acquisition of Merrill Lynch.
Following consultations with the U.S. government's 'Pay Czar' Mr Lewis, who became Bank of America's Chief Executive in 2001 and has been named 'Banker of the Year' on more than one occasion, agreed not to accept any pay or bonuses for the whole of 2009.
Any pessimism which resurfaced after the results from Bank of America were revealed was countered by some analysts and market watchers. Weston Boone from Stifel Nicolaus Capital Markets in Baltimore said:
I don't think it looks as bad as the market is painting it out to be. Their provisioning is down $1.7 billion, and they're making comments about leveling in card delinquencies