Bank of America loses $2.24B as loan losses rise
Posted by Xeno on October 16, 2009
The nation’s second-largest bank said it wrote down loans on its books by almost $10 billion during the July-September period, up almost $1 billion from the second quarter. The bank also added $2.1 billion to its reserves to cover bad loans, bringing its provision for credit losses to $11.7 billion. The bank’s total allowance for loan and lease losses now totals $35.83 billion.
Bank of America’s results were aided by profit from its wealth management business, which includes the bank’s Merrill Lynch division. While theJan. 1 acquisition of Merrill Lynch has brought widespread criticism and legal problems for Bank of America, the deal was paying off during the third quarter, when Merrill Lynch’s revenue and profit more than doubled from a year ago.
The bank’s earnings follow the pattern set earlier this week by Citigroup Inc. and JPMorgan Chase & Co., which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments. And on Friday, General Electric Co. reported that its GE Capital business, which includes credit cards, saw an 87 percent drop in profits, although it was also weighed down by commercial real estate losses.
Together, the reports depict a financial industry that is still deeply troubled, although the trading operations at companies like Bank of America, JPMorgan and Goldman Sachs Group Inc. mitigated some of the bad news.
Banks have predicted for some time that their loan losses would keep rising. And Bank of America’s CEO Ken Lewis, joining his counterparts at JPMorgan and Chase, confirmed that this trend will continue into the near future as unemployment rises and consumers keep struggling.