Credit Commentary

Bank of America Earnings Release

By Administrator on Tuesday, April 28 2009

Bank of America Corporation (NYSE: BAC) reported first-quarter 2009 net income of $4.2 billion. After preferred dividends, including $402 million paid to the U.S. government, diluted earnings per share were $0.44. However, Shares of Bank of America Inc. have taken a pounding Monday, after the company reporting earnings results that showed credit conditions continue to worsen, even though it posted strong revenue, most of which was related to the Merrill Lynch acquisition.

Global Card Services, which now includes Debit Card to better coordinate the company's payments businesses, swung to a net loss of $1.8 billion as the weak economic environment drove credit costs higher. Managed net revenue declined 5 percent to $7.5 billion due mainly to lower fee income and the absence of the positive impact from the Visa Inc. initial public offering a year earlier. The decline was partially offset by higher net interest income due to lower funding costs.

The delinquency rate has increased significantly owing to the weakening economy and growing unemployment rate. 30+ delinquencies increased 117 basis points to 7.85% of loans. While, 90+ delinquencies increased 83 basis point to 3.99% of loans.

Provision expense nearly doubled to $8.2 billion from a year earlier as economic conditions led to deterioration in the consumer card, consumer lending and small business portfolios, including a higher level of bankruptcies. Also contributing were reserve additions related to maturing securitizations.

Meanwhile, CEO Kenneth Lewis added that “we understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment.” On the conference call, he was downbeat about the outlook for the economy, saying that they see “weak but positive GDP growth by the fourth quarter this year,” and adding that unemployment won’t peak until next year.