Update: The stock is sinking pre-market by about 10%. Join us at 9:30 for the call.
Original post: Bank of America (BAC) continues the big bank profitability streak, saying it made $4.2 billion in the quarter. That includes $3.7 billion in profits from Merrill Lynch, due to a strong capital markets business. It also earned $1.9 billion on the sale of China Construction Bank shares. So right there, between the Merrill gains and the share sale, there goes all your profit.
Thus, EPS of $.44 handily exceeded expectations of $.04.
The pattern at Merrill appears to be similar that of other investment banks. Horrible Q4 followed up by huge Q1 trading gains.
But he admits that things are still tough.
From the release:
“The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment,” said Kenneth D. Lewis, chairman and chief executive officer. “It shows the power of our diversified business model as well as the ability of our associates to execute. We are especially gratified that our new teammates at Countrywide and Merrill Lynch had outstanding performance that contributed significantly to our success.”
However, we understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment,” Lewis said. “Our company continues to be a solid contributor to the effort to revitalize the U.S. economy through our industry-leading efforts to reform mortgage lending, restructure home loans where appropriate and mitigate foreclosures wherever possible. We look forward to continuing that role.”
The numbers are pretty ugly:
The provision for credit losses of $13.4 billion rose from $8.5 billion in the fourth quarter and included a $6.4 billion net addition to the allowance for loan and lease losses. Reserves were added across most consumer portfolios reflecting increasing economic stress on consumers. Reserves were also increased on commercial portfolios. Nonperforming assets were $25.7 billion compared with $18.2 billion at December 31, 2008 and $7.8 billion at March 31, 2008, reflecting the continued deterioration in portfolios tied to housing. The 2009 coverage ratios and amounts shown in the following table include Merrill Lynch.
Here it is in chart form
(Dollars in millions) Q1 2009 Q4 2008 Q1 2008<br /><br /> Provision for credit losses $13,380 $8,535 $6,010<br /><br /> Net Charge-offs 6,942 5,541 2,715<br /> Net Charge-off ratios(1) 2.85% 2.36% 1.25%<br /><br /> Total managed net losses $9,124 $7,398 $4,131<br /> Total managed net loss<br /> ratio(1) 3.40% 2.84% 1.70%<br />
More to come.