BofA Says Net Income Down 4%
Bank of America Corp. said Monday that third-quarter net income fell 4% as the company put aside money to protect against bad loans.
Economic fallout from the Sept.11 terrorist attacks also has dimmed the bank’s near-term earnings prospects, Chief Financial Officer James Hance told analysts in a conference call.
“If you had asked us in September if we thought operating earnings for the year would have a $5 in front of it, we would have still answered in the positive, even as the economy was slowing more than our original expectation,” Hance said. “But the events of September have added a new wrinkle in our view. With the market deceleration more pronounced, we are no longer as positive or as confident.”
Bank of America reported profit of $2.09 billion, or $1.28 a share, before a $1.25-billion charge to exit the troubled auto leasing and sub-prime real estate lending businesses. That beat the $1.25-a-share average estimate of analysts polled by Thomson Financial/First Call. In the year-earlier quarter, the Charlotte, N.C.-based company earned $2.18 billion, or $1.31.
“The results looked pretty good,” said U.S. Bancorp Piper Jaffray analyst Andrew Collins. “They are shoring up their balance sheet quite nicely, margins are up, and the reserves look healthy.”
Revenue rose 5% to $8.72 billion as low U.S. interest rates helped loan growth. The Federal Reserve has lowered interest rates nine times this year in efforts to prevent a recession.
Despite the rate cuts, Bank of America suffered from bad loans, lower gains on investments and scant fees from advising companies on mergers and new stock offerings in the third quarter.
Net charge-offs, or loans for which the company does not expect repayment, climbed to $1.5 billion from $435 million a year ago. The latest figures included $635 million in charge-offs related to the sub-prime real estate business.
Net interest income, or money the bank makes from lending, rose 14% to $5.29 billion.
Non-interest income fell 7% to $3.43 billion on lower market-sensitive revenue, including a $400-million drop in investment gains.
Bank of America shares rose $2.54 to $55.55 on the New York Stock Exchange.
