Bank of America Misses Earnings Projections

Monday, January 23rd 2006, 10:55 am
By: News On 6

CHARLOTTE, N.C. (AP) _ Bank of America Corp., the nation's second-largest bank by assets, posted lower fourth-quarter earnings Monday, saying its numbers were hurt by increases in bankruptcy filings and weaker trading results. The profits were far below Wall Street expectations, and its shares skidded on the New York Stock Exchange.

The Charlotte-based bank said its profit for the quarter was $3.77 billion, or 93 cents per share, down from $3.85 billion, or 94 cents per share, a year earlier.

Excluding merger and restructuring charges of $59 million before taxes from its acquisition of credit card company MBNA Corp., Bank of America would have earned 94 cents a share in the latest quarter.

Analysts polled by Thomson Financial had forecast earnings of $1.02 per share.

Revenue during the fourth quarter grew to $14.12 billion from $13.71 billion last year _ also below Wall Street projections of $14.52 billion.

In early trading, Bank of America's shares fell 61 cents, or 1.4 percent, to $43.58 on the NYSE.

In missing its earnings target, Bank of America joined Citigroup Inc., the nation's largest financial institution. Citigroup last week reported earnings 2 cents below analysts' expectations on weakness in its retail bank operations, and investors sent its shares down sharply. The nation's third-largest bank, JPMorgan Chase & Co., beat estimates but acknowledged weakness in its trading operations.

Ken Lewis, Bank of America's chairman and chief executive, blamed the fourth-quarter shortfall on increased amounts set aside for bad loans and lower trading results _ factors that influenced earnings at other banks during the quarter.

``The impact of the change in bankruptcy laws and changes in our practices for overdraft charge-offs and over-limit credit card fees reduced pretax results by about $320 million,'' he said in a statement. ``In addition, we had a weak trading quarter that was well under our performance in recent quarters.''

Thousands of Americans rushed to file for bankruptcy in the late summer and early fall ahead of the Oct. 17 change in the nation's bankruptcy law, which made it harder for them to discharge their debts.

Lewis noted this was a one-time event, saying: ``The bankruptcy issue will not recur and should actually benefit us going forward as we expect a reduced level of bankruptcy filings under the new law.''

And he added: ``We fully expect trading to do better in the coming quarters.''

Bank of America reported its provision for credit losses was $1.4 billion in the October-December period, up from $706 million a year earlier.

Consumer and middle-market business loan growth and higher deposits helped net interest income jump to $8.1 billion from $7.95 billion. Noninterest income rose 5 percent to $6.26 billion from $5.97 billion, helped by higher mortgage banking income and equity investment gains.

On Jan. 1, the bank completed its acquisition of MBNA in a $34.2 billion deal that gives the bank 40 million active credit card accounts on its ledger, making it one of the leading worldwide payments-services companies and issuers of credit, debit and prepaid cards based on total purchase volume.

For the year, Bank of America earned profits of $16.89 billion, or $4.15 a share, up from $14.14 billion, or $3.69 a share in 2004. Excluding merger and restructuring charges of $412 million, the company would have earned $4.21 per share in 2005. Revenue for the year totaled $56.77 billion, up from $48.88 billion in 2004.