CHARLOTTE, N.C. – Bank of America Corp. said on Monday its quarterly net income dropped 54 percent as the No. 3 U.S. bank holding company put aside money to protect against bad loans resulting from the slowing economy and took a $1.25 billion charge to exit businesses.
Deadly Sept. 11 attacks on New York and Washington pushed the economy to the brink of recession as consumers stopped spending, large airlines fired thousands of workers and share prices tumbled. As the slowdown eats into corporate profits, some big companies have struggled to repay bank debts.
The bank reported third-quarter net income of $841 million, or 51 cents a share, down from $1.83 billion, or $1.10 a share, a year earlier.
Earnings were $2.09 billion, or $1.28 a share, before a charge to exit auto leasing and the subprime real estate lending business, which involves home loans to people with poor credit histories. Year-ago earnings before special items were $2.18 billion, or $1.31 a share.
Wall Street had expected a profit of $1.15 to $1.29 a share, with an average estimate of $1.25, according to research firm Thomson Financial/First Call.
Revenues rose 5 percent to $8.72 billion as low U.S. interest rates helped loan growth. The Federal Reserve has lowered interest rates nine times so far this year in efforts to prevent a recession.
Despite the recent spate of rate cuts, Bank of America suffered from bad loans and lower gains on investments in the third quarter.
Net charge-offs, or loans for which the company does not expect repayment, rose to $1.5 billion from $435 million a year ago. The latest figures included $635 million in charge-offs related to the subprime real estate business, along with $135 million from selling problem commercial and consumer loans.
Net interest income, or money the bank makes from lending, rose 14 percent to $5.29 billion, helped by low rates. But non-interest income fell 7 percent to $3.43 billion on lower market-sensitive revenues, including a $400 million drop in investment gains. U.S. stock markets shut down for four days after last month's attacks, hurting many banks' Wall Street-type business.
Bank of America shares closed at $54.60 in Friday New York Stock Exchange trade. The stock has gained about 27 percent in the first nine months of the year, vastly outperforming the Standard & Poor's index of banks, which fell 5.6 percent in that time.
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