Bank of America Earnings Fall 32%; BB&T Reports Growth

Posted October 18, 2007 8:10 a.m. EDT
Updated October 18, 2007 9:22 a.m. EDT

— Bank of America Corp., the nation's second-largest bank, said Thursday its profit fell 32 percent in the third quarter as capital markets losses offset solid revenue growth in most businesses.

Net income declined to $3.7 billion, or 82 cents per share, in the three months ended September 30 from $5.42 billion, or $1.18 per share, a year ago.

The Charlotte-based bank's revenue fell 12 percent to $16.3 billion from $18.49 billion last year.

Analysts estimated earnings of $1.06 per share on revenue of $18.3 billion, according to a poll by Thomson Financial. The earnings estimates typically exclude one-time items.

In Winston-Salem, meanwhile, BB&T announced earnings of $444 million, or 80 cents per share. Those figures top the $417 million and 77 cents per share earnings in the same time frame a year ago.

"The third quarter presented significant challenges for the financial services industry, including unusual disruptions in financial markets and a rising level of loan losses," said Chairman and Chief Executive Officer John Allison in a statement.

"Although these events negatively affected BB&T's earnings, I am pleased with a number of other positive accomplishments for the quarter,” he added. “In particular, this quarter represents BB&T's fourth consecutive quarter of generating positive operating leverage and improved operating efficiency through solid execution of our emphasis on expense control. Also, our loan and deposit growth continued to be healthy during the quarter. In addition, last week we received the results of the FDIC's annual report on deposit market share, which were very positive for BB&T. On balance, our overall performance was very solid in a difficult environment."

Stockholders reacted to the Bank of America news negatively with shares falling $1.63, or 3.3 percent, to $48.40 in premarket trading.

Earnings from its global corporate and investment bank fell by $1.33 billion, or 93 percent, as a result of the disruption in the financial markets during the quarter.

Its expense provision for the unit increased $865 million due to consumer and small business credit costs rising from post bankruptcy reform lows, growth and seasoning in various portfolios and stress in several portfolios driven by the weakened U.S. housing market.

"While the significant dislocations in the capital markets have hurt most participants, we are still very disappointed in our third-quarter performance," Chairman and Chief Executive Kenneth D. Lewis said in a statement.

Nonetheless, he added "the majority of our businesses experienced solid revenue growth as sales momentum continued, demonstrating the value of our diverse business mix."

In the bank's largest consumer unit, which includes America's biggest credit-card business and bank-branch network, net income dropped 16 percent to $2.45 billion. Bank of America became the biggest U.S. credit card lender when it bought MBNA Corp. last year. Earnings were hurt this quarter by higher managed credit costs, the bank said.

Wealth-management revenue increased 24 percent to $2.2 billion, as profits grew 17 percent to $599 million. The business was aided by the company's $3.3 billion acquisition of U.S. Trust from Charles Schwab Corp. earlier this year, which contributed about 10 percent to revenue and 5 percent to net income.

Investment banking revenue fell 44 percent from a year ago as sales and trading-revenue declined.

For the first nine months of the year, net income was $14.7 billion, or $3.25 a share, down from $15.88 billion, or $3.44 a share in 2006. Revenue was $53.65 billion, down from $54.1 billion in 2006.