Bank of America
Mighty B of A still managed to post a 5.2% net income increase during its second quarter, but its archrivals managed double-digit earning gains despite overblown subprime woes at the giant money center banks. Citigroup
Credit quality is clearly deteriorating at most banks, and B of A saw close to a 50% increase in year-over-year net charge-offs and an even bigger jump in its provision for credit losses. But overall, its diversification across commercial banking, asset management, investment banking, and credit cards should easily offset credit-related worries from the residential housing implosion. The same goes for the competition.
Still, the flat to inverted yield curve led to a net interest margin decrease to 2.59%, even though return on equity improved to 17.6%, meaning B of A is still earning strong returns for shareholders. Overall, it was definitely a mixed quarter from most key banking metrics, as decent loan and asset growth didn't flow through to earnings.
There could be help on the way, as B of A could soon win LaSalle Bank as a result of the merger frenzy surrounding ABN Amro
As the second-quarter results demonstrate, B of A can't be counted on to grow on a consistent basis via organic or internal means. Winning LaSalle could provide another round of cost-cutting opportunities, which B of A has relied on as it has acquired its way to becoming one of the largest domestic banks.
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.