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Bank of America Misses, Cuts Dividend
Last Update: 07-Oct-08 08:18 ET
Bank of America (BAC 32.22) investors were hit with a double dose of disappointing news after yesterday's close. The firm first announced earnings results that missed the consensus estimate, amid ongoing loan and credit losses. It then announced it would be slashing its quarterly dividend to help raise capital levels.
The announcements reflect ongoing challenges to the banking industry, which appear unlikely to abate in the near term.
For the third quarter the commercial banking giant earned $0.15 per share on revenue of $19.90 billion. Earnings per share were down more than 80% when compared with the prior year, and down almost 80% from the second quarter. Revenue was up a substantial 21% from the prior year, and down just 2% from the second quarter.
The consensus forecast called for third quarter earnings of $0.66 per share on the back of $20.67 billion in revenue.
Bank of America's earnings shortfall was partially brought on by a significant increase in expense provisions.
Credit loss provision totaled $6.45 billion, up from $5.83 billion in the previous quarter and more than triple one year ago. The allowance for loan and lease losses totaled $20.4 billion, or 2.2% of loans and leases. That was up from $17.13 billion, or 1.1%, in the previous quarter and $9.54 billion, or 1.2%, last year.
Net charge-offs were $4.36 billion, or 1.8% of total average loans and leases. That is up from the $3.62 billion, or 1.7%, in the previous quarter, and also up from the $1.6 billion, or 0.8%, last year.
Nonperforming assets were $13.36 billion, or 1.4% of total loans, leases and foreclosed properties, compared with $9.75 billion, or 1.1%, at the end of the previous quarter, and $3.37 billion, or 0.4%, one year ago.
Bank of America is targeting a Tier 1 capital ratio of 8%, which makes it more than well-capitalized by regulatory standards. To do so, the bank intends to sell $10 billion in common stock as part of an effort to hit that level. The company will also cut its quarterly dividend in half to $0.32 per share.
Bank of America believes it is prudent to raise capital to very substantial levels in the current environment. Higher capital levels will help protect the bank from ongoing credit losses and depressed earnings, while also bolstering liquidity.
no matter where you go, there you are ...
"And remember, no matter where you go, there you are." .—Confucius
AL 29–11:Just Win Baby
some Merck news...still like them longterm, the Gardasil vaccine seems to be getting a leg up, they just laid off 8000 people (great for the bottom line) and expanding aggressively into the Indian market...
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