July 22, 2009
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News: BoA Forecast Retracted by KBW
Bank of America Corp (BoA) is now expected to post a profit of 80 cents a share for 2010. A recent report by Jefferson Harralson of Keefe, Bruyette & Woods, Inc. stated that Bank of American Corp (BoA), the nation's largest credit card company, could be facing a $12 million pretax charge in first quarter to comply with an accounting rule. The charge relates to how the company records its credit card defaults. However, on July 21st, Harralson reversed his expectations saying that the $150 billion of credit card receivables, home equity securitizations, and asset backed conduits would be an "adjustment to capital" rather than hitting the bottom line. The previous assessment projected a 10 cent per share loss.
Harralson said he adjusted his forecast after having a discussion with BoA's representatives that provided more clarity on assets held off the company's balance sheet. On July 17th, Bank of America, the Charlotte, North Carolina based credit card giant, reported a $1.62 billion loss in their credit card division. Its write-off's were the highest reported loss among the nation's top five lenders. Overall, BoA realized a net income of $3.22 billion for the second quarter. Last year same time, the bank realized a $582 million profit.
Earlier this year, Bank of American received $45 billion of taxpayers' money in the Federal Treasury Department's Troubled Asset Relief Program (TARP) bailout program. The deal helped to lift BoA's common equity more than $38 billion to support a need as a result of the U.S. stress tests in May. BoA's Chief Executive Officer, Kenneth Lewis, said that new government regulations specified by the Credit Cardholders Bill of Rights 2009 that becomes effective in February 2010 will further reduce credit card revenue by approximately $700 million. However, BoA's purchase of Merrill Lynch & Co. earlier this year is expected to help offset some of those losses.