As consumers struggle to pay off their credit card debts, Bank of America reported $1 billion in losses in the third quarter. This number, which has been floating all over the news today, actually increases to $2.24 billion when you factor in the company's owed dividends to preferred shareholders, according to
The New York Times. One such shareholder is, of course, the federal government—taxpayers gave Bank of America $45 billion in bailout money last year.
Bank of America lost 26 cent a share between July and September, which followed a second-quarter gain of 33 cents, or $3.2 billion, for the company. Wall Streeters were expecting losses at 12 cents a share.
Bank of America bolstered its third-quarter reserves with an additional $2.1 billion to prepare for credit-related losses, which were enormous, as many Americans are unable to pay back their credit card debt. The company reported $9.6 billion in charge-offs—debt owed by consumers with defaulted (forcefully closed) accounts. These loses overwhelmed the bank's other revenue from investments and retail, which increased by a surprising $26.4 billion, or 33 percent from this time last year.
Kenneth Lewis, the CEO of Bank of America, is set to retire at the end of the year, although his replacement has not been announced. In light of his company's loss, Lewis announced that he will return his salary for the year to avoid tangling with Obama pay Czar Kenneth Feinberg.
Do you see Bank of America recovering from this crisis? How long do you think credit will continue to haunt consumers?
Comments (30)
i don't know, but bank of america is a pain in the ass.
i only keep my money with them so i can have a hello kitty debit card. :|
Good. I bank with them and they haven't harassed me, but the horror stories I've heard of overdraft fees and random account deductions are despicable. They deserve a slap in the face given the many they have unfairly dispensed to their customers.
How can Bank of America lose all this money but then Chase make billions of dollars? Something seems to be amiss.
@frozencherries@xanga - I have the Hello Kitty debit card, too. And the matching checks :)
@salvatruca_stalking_havok13@xanga - YES. I overdrew once and I couldn't get money in quickly...(I had just gotten a new job + they paid bi weekly so I had to wait a couple weeks to get paid) $35 charge every 5 fucking days! All because I spent like $2.00 over what I had and then like, 50 cents... and both of those cost me $35 each as well. Just handing them over all that money for nothing was depressing once I got my check :[
The credit defaults will only get worse for all banks courtesy of the "jobless recovery".
The other question we need to ask ourselves is why did the Govt rescue an insolvent bank already laden with bad mortgage debt from their Countrywide acquisition? It would have made more sense to break up insolvent banks and let a smaller but stronger rival take it over. If the Govt is going to get involved, they should at least keep the notion of Capitalism alive by letting a stronger bank take over the weaker one.
Instead we have several sick banks still in prominent positions that we as taxpayers are also on the hook for. I'm sure Citibank's results won't be anything to celebrate either.
Banks are evil. Bank of America, my brothers choice of bank, made a flaw on his debit card and refuse to reimburse him, there solution is for him to close his account but he can't until he pays $40 that they accidently charged him in overdraft. Their hidden fees, sick bastards.
I was with US Bank along time ago and 20 dollar overdraft become a hundred something.....
Banks are evil.
Good. I hate Bank Of America, after all I have been through with them. I never want to step in one again.
Bank of America is haunting my every move with a "new charge policy" for everything I do. I have a prepaid credit-card that accepts direct deposit, and I'm 2 seconds away from ditching the bank account and their $200/mo witch hunt on it in favor of the nice, sensible $4.99/mo flat fee pre-paid card. I mean - I only do cash or e-transactions anyway. It's all I need.
I'll bet the bank's pension fund is large. Maybe they could buy their employer and keep the ball bouncing?
Shit, I have an account with Bank of America. o_o so does my mom.
credit cards are evil....
Even Bank of America isn't as evil as
Wachovia, who charged me unnecessary overdraft fees, refused to reverse
an accidental transaction unless I also paid 40 more dollars, and
closed my husband's bank account without telling him just because he
didn't use it for three weeks. Not to mention the fact that you're not allowed to do a non-ATM withdrawal in drive thru--you
have to come into the lobby to do it. WTF. Banks are just plain evil.
Well, with the exception of Harris Bank (Chicago). Those are some good
people.
Awww, you mean they're losing customers for gouging them with fees and poor service after they exist today purely because of tax-payers?
I'll cry for myself and other Americans as we had our wealth blatantly stolen and flushed down the toliets of the undeserving. BoA can burn.
@scrambledmegsntoast@xanga - As I believe it, Bernanke lied, saying that BoA was in trouble, but mostly ok in order to allocated it blood money. The truth is, that it wasn't, and was intended to consolidate much of the worthless assets held by other banks. In essence, it was a backdoor "bad bank" that had already been proven to be conceptually fraudulent and malignant.
Look for the bank to completely flop, along with many others after not only the attempts to keep the housing bubble inflated fail, but commercial real-estate fails too.
It probably didn't help that after the whole flag fiasco in one state, involving miniature flags that were removed by a branch manager of Bank of America, caused a hell of a lot of people to withdraw all of their funds and close their accounts with Bank of America. Even people who were not from that state or town.
The problem was that it was the American flag minis they were removing, which were put in the front lawn outside of that branch to honor a fallen soldier that many people in the community were welcoming home. Just in case some people didn't hear about it!
But, yeah, it was on Fox News and other News channels, and it was on the Internet. It got a lot of people outraged, sending nasty letters/e-mails and giving nasty calls to that branch, and many people removed their funds completely from their accounts and then had their accounts closed over it. The closing of accounts and such did not apparently occur for that one branch, however.
So, yeah, that probably didn't help. :p
As for whether they'll recover from this whole financial issue, I don't know. But, they probably will. It would be strange to hear of Bank of America actually closing down the doors of all of its branches. o.o
Wow, this is an actual news article.
@frozencherries@xanga - HAA SAME HERE! nice;)
My friend went to Europe and used her debit card over there. It so turns out she overdraft and was charged atleast $700 in fees. Plus whatever she spent over there.It took her about a month to pay them back because she was unemployeed at the moment. B-O-A threatened to send her fees to collections if she didnt pay within the 35 days and with that being said and done, she would be denied any credit card from any company for the next 5 years....
aint that some shiiiii*
scary
@talithakoum7@xanga - thats scary
@frozencherries@xanga - LMFAO . !! thats kute .
@scrambledmegsntoast@xanga -
Short answer-To quote Warren Buffet: "It isn't until the tide goes out that you see who's been swimming naked." B of A has substantial "balance sheet cleanup" to do yet- Chase had a smaller mess to start with, has faced its problems sooner, and is now in a better competitive position.
Long answer:1. B of A made more "stupid loans" than Chase.
2. B of A kept more of these loans "in portfolio" or securitized/sold them "with recourse" instead of selling them to others "without recourse".
3. B of A paid too much for Countrywide because (a) they didn't understand that the whole mortgage industry was operating in a fantasyland where bad loans become good because house price appreciation will make them so, (b) Countrywide was a major customer, and its failure would have reduced B of A's asset growth and revenue from lending to it and securitizing its mortgages; (c) they probably thought (greedily) that this was a chance to expand their own mortgage lending (never a great strength of B of A) rather cheaply. This acquisition hasn't worked out well at all. . .
4. At the behest of the Treasury, B of A agreed to take over Merrill Lynch with minimal due diligence. Merrill had lots of undisclosed problems that B of A has had to take over (losses on open unhedged trades, large obligations to its "high producing" executives and salespeople, etc.).
4. Chase took over WAMU which also had huge "stupid loan" problems, but they had been studying WAMU for months and offered a minimal price for WAMU's banking operations that was based on a well thought-out "worst case" scenario. (BTW, there were no other bidders, and I personally think they got it very cheaply.) The acquisition gave them a substantial market presence in parts of the country where they were previously weak (especially on the West Coast- where B of A had historically been supreme.)
5. In a downturn, the strong get stronger, and the weak get weaker. In the last 5 years or so, Chase husbanded its reserves better and adopted a more conservative attitude towards "asset growth" than B of A did. They now have more money to lend, on better terms, to the "prime" customers who will pay it back. B of A, by contrast is now severely restricting its "asset growth." If you were a "prime borrower" looking for the most money on the best terms, who would you call? If you were a "high producing" loan salesman, which bank would you rather be dealing with/working for? (A personal note- For no apparent reason, I've had "further draws suspended" on two large credit lines with B of A while Chase is now giving me "teaser" interest rate offers I wasn't getting from them two/three years ago.)
@Ewithani@xanga - That is a very good, detailed answer. Thank you!
@frozencherries@xanga - LOL @ the hello kitty debit card! your comment was priceless! haha