Bank of America (NYSE: BAC) recently announced that despite the status of the economy, especially the banking sector, they as a lender surpassed earning expectations in spite of reporting a serious loss for the second quarter. Company shares are continuing to surge as investors are newly inspired by the state of the credit markets, and the Dow Jones Industrial Average can thank the welcoming news from the financial sector for the gains it posted last week.
Much of this most recent news can be attributed to the fact that Bank of America saw great success in their other areas of business where bad loans were offset. Bank of America is the largest U.S. retail bank and mortgage lender, but the wealth management unit and the investment banking division were strong enough to overcome the weaker consumer and small business divisions, which have suffered greatly from the unstable credit market. During the second quarter of 2008, included are $212 million worth of pre-tax restructuring costs from the recent deal to purchase Countrywide Financial, which closed on July 1, 2008. Countrywide was looking at a $2.33 billion net loss during the second-quarter on $3.7 billion of credit-related losses and write-downs. These figures were not included in Bank of America’s second quarter earnings.
A recent earnings statement is helping investors to dismiss the many fears they may have had over the credit markets, as Bank of America posted a significantly lower decline in profit. Profit fell around 41% during the second quarter as compared to the same period of last year, which is attributed to the bad debts from the sluggish economy and weak housing market. Today’s earnings report showed profit of $3.41 billion, or $.72 cents per share, a decrease from last year’s second quarter’s numbers of $5.76 billion, or $1.28 per share. There was an increase in profit over the first quarter, with numbers of $1.2 billion, or $.23 per share. Revenue for the second quarter also increased to $20.3 billion.
“We are pleased with these solid results in a difficult financial environment. Outside of real estate-related products, our operating results were quite good virtually across all business segments,” stated CEO of Bank of America, Ken Lewis. “This performance demonstrates not only the advantages of our company’s diversity and scale, but also the ability of our associates to differentiate Bank of America in the eyes of customers and clients.”
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