NEW YORK – Bank of America Corp. (BAC), which is buying FleetBoston Financial Corp. (FBF), Thursday said fourth-quarter profit rose 4 percent, as consumer and investment banking grew and bad loans dropped.
The Charlotte, North Carolina-based bank said net income rose to $2.73 billion, or $1.83 per share, from $2.61 billion, or $1.69 per share, a year earlier.
Analysts polled by Reuters Research, a unit of Reuters Group Plc, on average forecast $1.77 per share. Revenue rose 9 percent to $9.79 billion.
"Credit cards, consumer loans and investment banking looked good, and chargeoffs were down," said Wayne Bopp, an analyst for Fifth Third Investment Advisors in Cincinnati, which has 200,000 Bank of America and 50,000 Fleet shares.
Chief Financial Officer James Hance said Bank of America hopes to complete its $47 billion purchase of No. 7 rival Fleet, which will give it a beachhead in the U.S. Northeast, by early April. He said the combined bank should meet or exceed analysts' profit forecast of $7.12 per share.
Fleet Thursday said its fourth-quarter profit nearly tripled as bad loans fell.
Bank of America said consumer and commercial banking profit rose 11 percent to $1.91 billion, corporate and investment banking profit nearly tripled to $576 million, asset management profit more than doubled to $262 million, the loss on equity investments declined to $67 million.
The bank set aside $583 million for bad loans, down 50 percent. Net charge-offs, or loans on which the bank does not expect to be paid back, fell 38 percent to $725 million, and nonperforming assets fell 43 percent to $3.02 billion.
Though profit beat forecasts, Bank of America shares did not participate in a broad rally in bank shares, triggered by Wednesday's $58 billion purchase of Bank One Corp. (ONE) by J.P. Morgan Chase & Co. (JPM)
Anton Schutz, who runs the Burnham Financial Services Fund, said some investors may have been concerned about Bank of America's trading revenue, which was unchanged from 2003. "People looked at the trading numbers and got a little upset but this is a big, diversified company," he said.
Bank of America shares fell 57 cents to $78.68 on the New York Stock Exchange. The Standard & Poor's banks index rose nearly 1.6 percent.
Signs of Commercial Lending Rebound
In an interview, Hance said "the consumer appears very strong to us," adding that there are signs that commercial lending is finally ready to rebound.
"There are good corporate profits, tax rates and incentives are helping, and interest rates are low," he said. "Confidence that the economy is going to do better is encouraging businesses to start doing things." Borrowing among medium-size companies might rise 6 percent this year, he said.
The quarter was eventful for Bank of America, whose Nations Funds unit was already being investigated by regulators for its dealings with a hedge fund accused of trading mutual funds illegally.
Chief Executive Kenneth Lewis engineered the Fleet purchase, which would make Bank of America the No. 2 U.S. bank after Citigroup Inc. (C), at least until J.P. Morgan buys Bank One.
In December, Bank of America became enmeshed in the scandal involving Italian food company Parmalat, one of its clients, when it said a 4 billion euro account it supposedly held for the company did not exist.
Hance said Bank of America had $274 million of exposure to the now-bankrupt Parmalat, and it wrote off $114 million in the fourth quarter.
He said the bank launched a "very extensive and exhaustive" probe of its Parmalat dealings and can handle any "material credit impact" from Parmalat.