Bank of America sees 1Q profits fall 77%

BLOOMBERG FILE PHOTO / STEPHEN HILGER

“IT’S TOO EARLY to strike up the band and say that happy days are here again,” Kenneth Lewis, BofA’s chairman, president and CEO, told a conference call today as the bank downgraded its 2008 profit projections.

By PBN Staff

CHARLOTTE, N.C. – Bank of America Corp. (NYSE: BAC) today posted a first-quarter profit of $1.21 billion, a 77-percent decline from the year-ago period’s $5.26 billion, on revenue that fell 6 percent to $17.3 billion. Earnings per diluted share shrank to 23 cents from the 2007 first quarter’s $1.16.

Its results for the quarter just ended included $1.31 billion in investment losses and $2.72 billion in uncollectible loans, Bloomberg News noted. “They are paddling upstream with regards to credit losses and credit quality,” said Walter “Bucky” Hellwig, senior vice president of Morgan Asset Management in Birmingham, Ala.

Bank of America – which last year overtook Citibank to become the nation’s largest bank by market value – said the nation’s slumping economy hurt business, particularly its home-equity, home construction and small business lending. Segment profits fell 92 percent for the corporate and investment unit and 59 percent for the consumer and small business unit, the bank added. Still, BofA remains “well-capitalized” by federal standards with a Tier 1 capital ratio of 7.51 percent at the end of the first quarter, up from 6.87 percent at year’s end.

“The first quarter was much worse than our expectations three months ago,” Chairman, President and CEO Kenneth Lewis told a conference call today. He downgraded his projections for all of 2008 to “sequential profit improvement” through the end of the year, rather than the 20-percent earnings growth he had predicted in January.

Asked whether, with the U.S. economy weakening, the bank needs a larger overseas presence, Lewis noted that “the three most global franchises I can think of are UBS, Merrill Lynch and Citigroup.” Yet Citigroup last week posted a first-quarter loss of $5.1 billion, and Bloomberg data show that over the past 15 months, as the subprime mortgage industry collapsed, UBS AG, Merrill Lunch & Co. and Citigroup Inc. have taken writedowns of about $105 billion.

BofA’s exposure to such risks will grow with its pending acquisition of Countrywide Financial Corp., the nation’s largest home lender, which Lewis said is on schedule to close early in the third quarter.

Bank of America Corp. (NYSE: BAC) – the nation’s largest bank by market value – is one of the world’s largest financial institutions, with clients in 175 nations, including 98 percent of the U.S. Fortune 500 and 80 percent of the Fortune Global 500. In the United States alone, it serves more than 56 million consumers and small businesses via more than 5,700 retail offices and 17,000 ATMs. To learn more, visit www.bankofamerica.com.