Bank of America Corporation (NYSE: BAC) has reported earnings and the headline data will come as a disappointment. There are of course charges in the numbers, but the headline earnings was $0.04 EPS versus $0.14 EPS expected from Thomson Reuters. After items, the net loss was -$0.16 EPS or -$1.2 billion. On a Net basis, this includes a goodwill impairment charge of $2.0 billion. Revenues were classified as $22.6 billion after items versus estimates of $24.87 billion.
Investors will want to know that the other items affecting earnings were a $4.1 billion provision expense for outstanding and future mortgage repurchase claims, which includes the previously announced $3.0 billion for the GSE’s. There was also a $1.5 billion litigation expenses in the company’s consumer businesses, and lower sales and trading revenues. There was approximately $360 million in net gains from the sale of non-core assets, and a $1.2 billion income tax benefit from a valuation allowance release.
Deposits rose to a record $1 trillion at year-end and the bank said that its credit costs fell as it continued to build capital and strengthen its books. Fourth-quarter 2010 net charge-offs were 2.87%, a third straight drop. Global excess liquidity rose to a record $336 billion. The Tier 1 common ratio reached 8.6% versus 7.81% at the end of 2009. The tangible common equity ratio reached 5.99% versus 5.56% at the end of 2009.
Bank of America will claim a success here. While there are some successes, the headline and the trend of selling banks on earnings looks to be winning right now as shares are trading initially around $14.44 versus a Thursday close of $14.54.
JON C. OGG
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