Bank of America swung to a loss in the third quarter after two months of profitability due to the higher losses in the consumer and commercial loans front. It reported a net loss of $1bn, or $0.26 diluted loss per share after adjustments. This is a 180 turn from last year’s $1.2bn in net income.
The numbers were also affected by a $2.6bn writedown resulting from an improvement in the company’s credit spreads.
Unlike its peer Citi, which saw decline in its provision for credit losses, the bank in fact added another $2bn. But improvements in delinquencies in the unsecured consumer portfolios make that number smaller than the amount added to the provision in Q2.
Just like Citi, average retail deposits increased during the most recent quarter. Average customer deposits rose 11% from last year as a result of transfer of certain deposits from Global Wealth and Investment Management and strong organic growth.
Given its exposure to the weak consumers, the bank’s credit card and home loans and insurance businesses continue to be money-losing. The card loss widened to $1bn while the loss for home loans and insurance expandned to $1.6bn from a measly $54m.
It is not all negative for BofA. The company saw strong performances from its Global Markets and Global Wealth and Investment Management divisions, bringing its net income up by another $2.8bn. Ever since Merrill Lynch’s business was absorbed, BofA has been receiving profits through the strong showing by the people from the other bank.
Meanwhile, Bank of America also got better Tier 1 ratios – 7.25% Tier 1 Common, which is still lower than Goldman, JP Morgan and Citi’s, and 12.46% Tier 1 Capital.
Outgoing CEO Ken Lewis sees a challenge in the still-growing trouble with credit costs and consumer delinquencies.
“Excluding those items, our revenue continued to hold up well. Obviously, credit costs remain high, and that is our major financial challenge going forward. However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card customers.”
Read the official release.