Bank of America Corp. posted a 32% drop in third-quarter net income amid a dismal performance by its investment bank and higher reserves to cover potential bad loans.
The combination of more than $1.4 billion in trading losses in its investment bank and about $2 billion in provisions for credit losses pushed the Charlotte-based bank's third-quarter profits down to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier. Revenue fell 12% to $16.3 billion. It was the first time since late 2005 that Bank of America has failed to boost its year-over-year profits.
While other banks have been struggling with the fallout from this summer's credit crunch, and analysts were bracing for a bad quarter, Bank of America's results fell far short of Wall Street's expectations of earnings of $1.06 a share on revenue of $18.3 billion.
THis is more troubling news from the financial sector. The WSJ has a "cheat sheet" of the credit crunch/mortgage impact on earnings from a variety of companies. It's not a pretty sight. Merrill, IBM, UBS, Citigroup, WAMU are all on the list as are some of the other largest companies on the exchange.
The bottom line is the impact has been sweeping and wide. And with another 12-18 months of ARMS resets to go, we're just getting started with the problems in earnings.