For the first time in over 20 years Bank of America (NYSE:BAC) posted its first annual loss, much of that from the ongoing default crisis from consumers’ inability or unwillingness to pay back their home loans. To a lesser degree the one-off payment of the bailout money it received from taxpayers was also part of the yearly loss posted by the largest bank in America.
Losses in the fourth quarter came in at $5.2 billion for the financial institution after payback charges and dividends for holders of preferred stock in the company. The losses came to 60 cents a share. A disastrous quarter and year for the bank, no matter how you look at it or others try to spin it.
Last year for the same quarter the company lost $2.4 billion or 48 cents a share.
Amazingly, some of those watching the industry attempt to make it sound like everything is okay, using words like things are stabilizing or returning to some type of normal condition. No wonder it’s hard to get straight answers when analysts and institutional investors make these types of comments and delusional observations.
The numbers put up by the investment banking arm of the company were also not that impressive because much of that came from simply adding on the increase in that regard from the acquisition of Merrill Lynch. Net income from the international market division came in at $1.2 billion in contrast to a $3.7 billion loss year-over-year. Net income also doubled at the global wealth and investment management division, where Merrill added $1.3 billion to the bottom line.
New CEO Brian Moynihan in an effort to manage expectations going forward said this in a statement: “Economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth. We are encouraged by signs the economy is improving, as we have seen in the stabilization of our credit costs, particularly in the consumer business.”
His statement on the economy improving is completely suspect, and I wonder where he thinks that improvement is coming from? It’s odd to say that right after stating unemployment will continue to remain high and American consumers will remain in a tight mode for some time to come.
What he must be saying is he thinks the global markets will make up for that with significant growth, as there’s nothing in the American economy happening to be positive about in any sustainable or meaningful way.
For example, even though there was some improvement from the third quarter concerning loan defaults, they still had to write off $8.4 billion during the fourth quarter, and many economists and commentators believe all the major banks have been holding off on declaring bankruptcy on many of their homes in order to make their performance look better; making the situation worse than it even reportedly is. Last quarter Bank of America wrote off $9.6 billion in noncollectable loans.
When taken altogether, nonperforming loans at the company increased by 7 percent for the quarter, again, questioning the alleged economic recovery being reported by the mainstream media.
Credit card losses also continue to remain high, with no improvement during the fourth quarter, again reaching about $1 billion during that period.
For people in the United States, this confirms we’re far from experiencing an economic recovery, and unless someone wants to start laying out the blueprint for where all this recovery is coming from, I wouldn’t believe it, and would plan accordingly.
Even if the investment banking side of the business does well for Bank of America or other banks, that adds nothing to the American economy, neither does it reflect economic strength here, as it simply is the collection of investment money from other countries which is added to the coffers of the bank.
It doesn’t matter which bank you look at among the larger bellwether banks in America, all of them continue to suffer large mortgage defaults, the bread and butter of their businesses, and there’s absolutely nothing to indicate this is going to change anytime soon, and is actually projected to get worse in the first half of 2010, and then the commercial loan defaults will start to rise. g
We’re still in a deep recession as these loan default numbers show us, and accounting gimmicks, tricks or not forcing homeowners to go into foreclosure keep the full reality of what’s happening from being discovered by regular Americans who don’t understand what’s going on. Those types of things can only last so long before being exposed, as the real estate bubble proved and is still proving.
