BoA Announces 95% Earnings Slowdown

by Stewart Douglas

Story link: BoA Announces 95% Earnings Slowdown

The Bank of America has today announced that it has realised a 95% downturn in its final quarterly earnings for 2007 as a result of its ongoing exposure to the sub-prime sector, following in the footsteps of other leading investment banks which have again this week reported poor performance as a result of the collapse of the sub-prime mortgage sector.

Earnings at the bank over the last quarter had fallen from $5.26 billion in 2006 down to a paltry $268 million, as a result of the growing requirement for writedowns and losses derived from devaluations of assets within the sub-prime sector, which have plagued investment banks and investment portfolio over the end of last year.

The news follows reports from Merrill Lynch and Citigroup that marked further declines in their investment portfolio, whilst investment bank Wachovia reported a staggering 98% fall in its net profit figures over the year as a result of its own exposure to the sector.

Bank of America chief executive Kenneth Lewis has today been quoted as saying that whilst they are not happy with their performance over the end of the year, the bank does bear some optimism as to the immediate future of its profitability, with a view to ensuring growth over 2008 despite the wider economic problems likely to impact upon investment markets.

The bank’s revenues over the final quarter were down by over 30%, whilst provision was also made for a $5.28 billion writedown to offset the value of assets lost since the collapse of the sub-prime sector leading to a highly embarrassing trading loss.

“We are cautiously optimistic about 2008, though we believe economic growth will be anaemic at best in the first half,” said Lewis commenting on the immediate future of the bank.