Bank of America, the nation’s second-largest banking group, said Thursday that its Q3 profit slowed sharply to $3.7 billion largely due to swelling investment losses.
The Charlotte, North Carolina-based financial titan said its latest quarterly earnings moderated a hefty 32% compared with $5.4 billion a year earlier. Bank of America’s profit was lower than expected by most Wall Street analysts, but it reaped a higher profit than arch rival Citigroup, which disclosed a net profit of $2.4 billion for the quarter on Monday. “While the significant dislocations in the capital markets have hurt most participants, we are still very disappointed in our Q3 performance,” said Bank of America chairman and CEO Kenneth Lewis.
The bank, which has expanded aggressively in recent years, revealed earnings per share of 82 cents. Wall Street had expected Bank of America to post earnings per share of $1.05. Revenues slowed 12% to $16.3 billion during the July-September period from a year ago. Despite reaping a profit of well over $3 billion, Bank of America’s earnings potential was hit by a downturn in investment banking business, losses from mortgage-backed securities and other investment losses tied to the distressed credit markets.
The financial giant, like many of its rivals, has suffered from its exposure to the trillion-dollar US mortgage market and credit markets. Bank of America said it had a net revenue loss of $527 million relating to bets it waged on mortgage securities, including commercial mortgages, and other risky securities. It said it had also been forced to write-down $247 million related to loans and commitments tied to takeovers and acquisitions.
US stock markets fell heavily in August as several large financial firms revealed losses tied to mortgage-backed securities, which in turn triggered a credit crunch. The credit squeeze has put a brake on corporate takeovers which in turn has slowed demand for investment banking services. Bank of America has expanded aggressively in recent years, swallowing FleetBoston Financial and the MBNA credit card firm. (rawstory.com)