4Q: BoA Posts $1.79B Loss, Gets $20B Capital Injection

After securing a fresh $20 billion capital infusion from the government to help with the acquisition of Merrill Lynch, Bank of America Corp. reported a $1.79 billion fourth-quarter loss - its first quarterly loss in 17 years.


The lifeline from the federal government – representing one-fifth of a trillion dollars – was granted to enable the Charlotte, North Carolina-based company to absorb Merrill Lynch, which lost a record $15.31 billion in the fourth quarter.

BoA CEO Kenneth Lewis asked the government for aid once Merrill’s writedowns were far greater than anticipated, with the thought of acquiring the $19.4 billion takeover exclusively.

Bank of America along with Citigroup Inc has received $45 billion in Trouble Asset Relief Program (TARP) funds, who are the main recipients of the government intercession during the economic crisis.

Lewis anticipates quarterly dividend net losses to increase beyond the current dividend of a penny for the next several quarters.

"It is difficult to focus on what is going right at this time," Lewis said on a conference call, but added that the economic crisis "will end some day, and people will remember that our company was there for them in hard times."

The Charlotte-based company has a reserve of $8.54 billion for bad loans which has been increased from the $6.45 billion in the third quarter.

Mortgage production for the fourth quarter was $49.9 billion, seemingly an improvement from $43.9 billion during the year-ago period – unless you consider that the latest results follow the July acquisition of Countrywide Financial Corp.

However, Bank of America reported that "mortgage application volume increased significantly following the November Treasury announcement."

Loan modifications have increased from 230,000 to an expected 630,000 due to non-performing residential loans ending in 2008 at $7.0 billion up from $4.6 billion three months prior.

Including 6,000 home-retention associates, Bank of America reported a full-time workforce of 243,075 employees at year’s end, compared to 249,993 at the end of the third quarter and 209,718 at the end of 2007.

BoA has stated it anticipates additional job losses of 30,000 to 35,000 over the next three years after the Merrill merger, which adds to the 7,500 job cuts after the Countrywide acquisition.


Posted on Tuesday, January 20, 2009 by admin