Bank of America (NYSE:BAC) reported a fourth-quarter loss of $5.2 billion, or $0.60 per share, this morning. Stripping out a one-time loss from repaying TARP, and preferred dividends associated with that deal, the loss would have been just $194 million.
That's not bad, but we need to dig deeper. Breaking quarterly income out by segment (net of the TARP charge), here's what you get:
|
Segment |
Q4 2009 |
Q3 2009 |
|---|---|---|
|
Deposits |
$595 million |
$798 million |
|
Credit cards |
($1 billion) |
($1 billion) |
|
Home loans and insurance |
($993 million) |
($1.6 billion) |
|
Global banking |
$264 million |
($40 million) |
|
Global markets |
$1.2 billion |
$2.2 billion |
|
Wealth management |
$1.3 billion |
$274 million |
|
Other |
($1.5 billion) |
($1.6 billion) |
|
Total |
($194 million) |
($1 billion) |
A few notable points:
- Credit cards are still extremely weak. That was expected.
- Home-loan losses improved meaningfully.
- Global markets -- think trading -- fell dramatically.
Nothing too remarkable here, except for the decline in global markets. We saw similar segment declines at Citigroup (NYSE:C) and JPMorgan Chase (NYSE:JPM) when they reported earnings over the past few days. There's clearly a market trend eroding the staggering profits that banks pulled from this segment over the past year. The biggest takeaway is what that means for the bank that relies almost 100% on this area -- Goldman Sachs (NYSE:GS). Goldman reports earnings tomorrow morning. If the same trend in capital markets continues, it could be a very, very interesting report.
Moving on to B of A's credit quality:
|
Metric |
Q4 2009 |
Q3 2009 |
Q2 2009 |
Q1 2009 |
|---|---|---|---|---|
|
Loans 90+ days past due |
$16.8 billion |
$7.6 billion |
$6.4 billion |
$6.3 billion |
|
Nonperforming loans / total loans |
3.75% |
3.51% |
3.12% |
2.47% |
|
Allowance for losses / nonperforming loans |
111% |
112% |
116% |
122% |
|
Total net charge-offs |
$8.4 billion |
$9.6 billion |
$8.7 billion |
$6.9 billion |
To say that credit has stabilized is being generous. Overall, it still ain't a pretty picture. Nonperforming assets are increasing while the proportional allowance for losses is decreasing. Granted, B of A spent the last year bulking up its loss reserves like a champion. But it's a bit brave to conclude that the credit-quality thunderstorm that's utterly crushed B of A's earnings potential is over.
What's your take? Share your thoughts in the comments section below.
