The credit crunch sent Bank of America’s quarterly profits plunging 77% after weak trading on Wall Street and in retail banking, it was announced on Monday.
Bank of America, which has the largest branch network in the United States, wrote off more than $5-billion in trading losses and provisions against bad debts. First-quarter earnings fell from $5,26-billion to $1,21-billion.
Kenneth Lewis, chief executive, said: ”The first quarter was much worse than our expectations three months ago.”
The bank joins several top financial institutions struggling with collapsing credit markets and a downturn in the US economy. The bank raised provisions against loan defaults by $4,78-billion to $6,01-billion and wrote down the value of its mortgage-related instruments by $1,47-billion. Its shares dropped by 2,2% to $37,72 in New York.
The bank’s response to the credit crunch has been aggressive; it is buying the troubled mortgage lender Countrywide Financial and recently expanded in the Midwest by taking over LaSalle Bank.
Meanwhile, the 10th-largest US bank, the Cleveland-based National City, announced that it had raised $7-billion in equity to cope with steep mortgage losses. Its shares dropped by 28% in New York. — guardian.co.uk Â