I'm afraid so. The second biggest bank on the nation and one of the biggest in the world just released numbers showing that because of its involvement in the mortgage/credit imbroglio, it will be reporting that its profits won't be even 25% of what they were last year.
Bank of America, which has a sprawling business in personal and commercial loans, reported a 77 percent decline in profit Monday, the latest indication of how financial troubles that started with subprime mortgages have spread across the credit markets.
In reporting its first-quarter results, the Charlotte bank said it wrote down $1.9 billion of assets on its books, including securities linked to subprime mortgages and leveraged loans used to finance corporate buyouts.
The bank's earnings were also hurt by the $3.3 billion set aside to cover expected losses, particularly on home-equity, small-business and home-builder loans.
(emphasis added)
That isn't quite the devastating hit that Bear Stearns took recently but it ain't good news.
Bank of America said its first-quarter profit was $1.21 billion, or 23 cents per share, on revenue of $17 billion. That compares with profit of $5.26 billion, or $1.16 a share, in the first quarter a year ago on revenue of $18.16 billion. While the write-down was substantially smaller than analysts' worst expectations, the bank's profit came in under Wall Street estimates. Analysts polled by Thomson Financial expected earnings of 41 cents a share on $16.46 billion in revenue.
***
"These results clearly did not meet our expectations," said Kenneth D. Lewis, chairman and chief executive....
No, I would imagine he hadn't expected to lose quite that much. It's yet another sign that our economy is in much deeper trouble than most of us think. The infrastructure is rumbling with aftershocks, each one a shade worse than the last. Yet despite this latest tick, BofA's stock price is off less than 3% when a major downturn should have been expected.
Bank of America shares fell about 2.5 percent Monday, to $37.61.
Kris Niswander, associate director of financial institutions at SNL Financial, said investors appear to be taking the recent string of poor bank results, including Bank of America's, in stride. He said this was partly because the first-quarter losses, such as those on home-equity loans, were "easier to wrap your head around" than those that occurred last year as the result of complex mortgage-backed securities.
"In some sense, bank performance is being redefined," Niswander said. "So bad news is good news as long as the bad news is better than anticipated."
(emphasis added)
Once again we have that odd Wall Street phenomenon, the "Bad News is Good News" Orwellianism of unsubstianted hope combined with fingers crossed behind fatted asses in $2000 Armani suits. If they pretend it doesn't mean anything for BofA to go into a tailspin, maybe they'll luck out and it won't.
Studs Terkel once asked a retired Wall Street mandarin who was alive and working in 1929, what the Street's response to the sudden crash was. Said the Mandarin, "We waited for an announcement." Studs says he didn't have the heart to ask the obvious question: "From who? God? the president? yourself? What kind of announcement?"
One is left with much the same feeling now, as if our present-day Mandarins are going to go right on denying that there's anything seriously wrong with the system until the day that a) it falls down around their ears, or b) someone "in authority" makes an announcement that the trouble is now recognized, you know, officially. Then they'll sit around waiting to be bailed out. By us.
But what if we don't have the money either? Despite all the denial, consumer confidence is at its lowest point since they started measuring it. Meanwhile, Bush is running around the world defending the effects of NAFTA.
Well, he would, wouldn't he.
After meeting with Bush, Mexican President Felipe Calderón touched on the recent criticism of NAFTA from both Sens. Hillary Rodham Clinton (D-N.Y.) and Barack Obama (D-Ill.), who have promised to revisit the treaty if elected president.
Without mentioning the candidates by name, Calderón said, "I do not believe that people are realizing how many benefits NAFTA has brought both to the United States and to Mexico." He said the agreement has meant more jobs and economic growth and is "decreasing the flow of immigration."
White House aides have also defended the trade pact in recent days. "We want to find ways to, frankly, convince the American people . . . that this is an arrangement that's worked for us, and it's also worked for our neighbors," Dan Fisk, the top White House staffer on Latin America, said before the summit. "There's nothing broken. Why fix a success?"
(emphasis added)
This clown just won't quit. Not satisfied with destroying the economy for every un-millionaire, now he wants to ensure that the mechanism which help create that destruction keeps right on doing so.
Comments