April 16,2009
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News: B of A Net Increase Doesn't Provide Relief.
Net income for first quarter 2009 was reported by Bank of America Corporation today at $4.2 billion compared to the $1.2 billion they reported for first quarter 2008. Although the results are positive, BoA's credit card business was not a contributing factor. According to BoA, credit card defaults increased to 8.62% compared to 5.19% of first quarter 2008. Bad assets also increased by 1.96% for fourth quarter 2008. Bank of American credits their positive net income results to the acquisition of Merrill Lynch and Countywide Financial. Merrill Lynch alone accounts for $3.7 billion. This doesn't shine much light on the stability of credit card accounts which recently motivated BoA to increase the interest rates on consumer account balances.
As lower mortgage interest rates slowly push the mortgage lending business up, increased credit card interest rates have made it more difficult for consumers to reduce their debt and save. So, how does BoA plan on being part of the solution? As of yet, little appears to have been done. In fact, their strategies look to add to the problem by increasing credit card interest rates. Although BoA gives credit to some strategic acquisitions and the abilities of its employees in executing diversified business models, certainly the government's role in the bailout investment package is a main contributing factor. In a news release by PR Newswire, Bank of America's Kenneth D. Lewis, chairman and chief executive officer, acknowledges that ongoing credit issues and a staggering economy will continue to be problematic.
Despite the positive net income results, BoA's stock took a sharp drop in this morning's trade. Investors are not happy with the company's rising mortgage and credit card losses. Bank of American added $13.4 billion toward these losses in the first quarter alone. They are not alone in this scenario; Citigroup and Capital One Financial Corp are crammed into the life boat with them. This news comes while BoA is facing a battle in the boardroom. A proposal to separate the powers of the company's chairman and chief executive is the fuel for the fire. Additionally, Egan-Jones Proxy Services is asking shareholders to withhold votes for Ken Lewis and four other board member nominees. The vote is scheduled to be tallied at BoA's annual meeting on April 29th.