Bank of America Corporation announces full-year 2008 profit of $4.01 billion compared with net income of $14.98 billion a year earlier. Earnings after preferred dividends and available to common shareholders were $2.56 billion, or $0.55 per diluted share, down from $14.80 billion, or $3.30 per share.
In the fourth quarter of 2008, the company had a net loss of $1.79 billion compared with net income of $268 million a year earlier. The net loss applicable to common shareholders was $2.39 billion, or $0.48 per diluted share, down from net income of $215 million, or $0.05 per share, in the same period in 2007. Results include Countrywide Financial, which Bank of America purchased on 1 July, but not Merrill Lynch & Co., Inc., which was acquired on 1 January 2009.
Global Consumer and Small Business Banking and Global Wealth and Investment Management were profitable, paced by Bank of America’s successful and expanding deposit business. Negative results in Capital Markets and Advisory Services masked the profitability in Business Lending and Treasury Services within Global Corporate and Investment Banking.
Bank of America ended 2008 with a Tier 1 capital ratio of 9.15%. Merrill Lynch preliminary results indicate a fourth-quarter net loss of $15.31 billion, or $9.62 per diluted share, driven by severe capital markets dislocations.
In view of the continuing severe conditions in the markets and economy, the U.S. government agreed to assist in the Merrill acquisition by making a further investment in Bank of America of $20 billion in preferred stock carrying an 8% dividend rate.
In addition, the government has agreed to provide protection against further losses on $118 billion in selected capital markets exposure, primarily from the former Merrill Lynch portfolio. Under the agreement, Bank of America would cover the first $10 billion in losses and the government would cover 90% of any subsequent losses. Bank of America would pay a premium of 3.4% of those assets for this program.
On a pro forma basis, this additional capital would boost the company’s Tier 1 capital ratio to approximately 10.70%.
In light of continuing severe economic and financial market conditions, the Bank of America Board of Directors has declared a first-quarter dividend of $.01 per share payable 27 March 2009 to shareholders of record as of 6 March 2009.
Bank of America extended more than $115 billion in new credit in the fourth quarter. It is increasing staff in its mortgage unit to meet a surge in demand that began late in December as mortgage rates fell. The company continues to prudently extend credit to commercial and consumer borrowers throughout its product line.
L.D.