Bank of America Sees 'Stabilization' in Credit Losses

Brian MoynihanBank of America, the nation’s top lender and second-largest credit card issuer, reported a $5.2 billion loss, or 60 cents per share, for the fourth quarter, including its repayment to the government bailout program, compared to a loss of $2.4 billion a year earlier.
But the bank sees a glimmer of hope in the “stabilization” of credit losses. Net charge-offs saw the first decline – compared to a previous quarter – in nearly four years.
In the bank’s overall earnings report, its deficit for the fourth quarter was $194 million, excluding the loss attributed to the repayment of Troubled Asset Relief Program, or TARP, funds.
For the year, Bank of America reported a net income of $6.3 billion, compared with net income of $4 billion in 2008.
As with quarterly reports this week from Chase and Citigroup, earnings were hurt by still significant credit losses, although those costs seem to be stabilizing.
Card income for the quarter declined $1.3 billion mainly due to higher credit losses on securitized credit card loans and lower fee income.
Losses, however, declined in most consumer portfolios from the prior quarter, BofA reported.
“Credit quality showed signs of improvement in most portfolios compared with the prior quarter, although credit costs remained high as global economic conditions remained challenging,” the bank said.
Net charge-offs were $1.2 billion lower than the previous quarter, the first quarter-to-quarter decline in nearly four years, the bank reported.
Bank of America’s new chief executive pointed to the non-credit side the business in his general assessment.
“While it’s disappointing to report a loss for the fourth quarter, there were a number of important accomplishments worth noting,” said Chief Executive Officer and President Brian T. Moynihan, who took over the top job at the beginning of the year. “First, we repaid the American taxpayer, with interest, for the TARP investment. Second, we have taken steps to strengthen our balance sheet through successful securities offerings. And third, all of our non-credit businesses recorded positive contributions to our results.”
The bank’s provision for credit losses was $10.1 billion, $1.6 billion lower than the third quarter and $1.6 billion higher than the same period a year earlier. The $1.7 billion addition to the reserve for credit losses was lower than the third quarter, driven by “lower additions on the purchased impaired consumer portfolios obtained through acquisitions and improved delinquencies in certain consumer and small business portfolios.”
“As we look at 2010, we are encouraged by signs the economy is improving, as we have seen in the stabilization of our credit costs, particularly in the consumer businesses,” Moynihan said.”That said, economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.”

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