From the WSJ:
Wachovia Corp.'s fourth-quarter net income plummeted 98%, as the company's deteriorating lending portfolio forced it to dramatically increase its loan-loss provision. The company also saw its bad loans and delinquencies surge.
The company increased its loan-loss provision to $1.5 billion from $206 million. Wachovia, the fourth-largest U.S. bank by consolidated assets, last month raised its loan-loss provision estimate to $1 billion over charge-offs and estimated pretax market-related losses close to $1.34 billion.
Bank of America (BAC - Cramer's Take - Stockpickr - Rating) on Tuesday reported its fourth-quarter profit plunged 95%, hurt by the ongoing credit crunch and a worsening housing environment that forced the company to set aside extra money to cover loan losses.
BofA also incurred $400 million in losses as a result of writedowns to securities purchased from "certain company-managed cash management funds," as well as weaker trading results. Last month, BofA's asset management unit, Columbia Management, was forced to shut down one of its money market funds after several large institutional investors took their money out amid losses on certain asset-backed securities.
With losses and increases in loan-loss provisions of that size financial companies will not be making a lot of new loans regardless of what the prevailing interest rate is.