Bank of America has reported a third-quarter 2009 net loss of $1 billion. Global banking net income fell to $40 million. Strong deposit growth and the impact of the Merrill Lynch acquisition were more than offset by higher credit and FDIC insurance costs.
Commercial Banking revenue was flat at $2.9 billion reflecting strong deposit growth and credit spread improvement on loan yields offset by lower residual net interest income, narrower spreads on deposits and reduced loan balances. Net income was negatively impacted by a significant increase in credit costs and FDIC insurance costs. Global wealth and investment management net income rose to $271 million driven by the addition of Merrill Lynch and a decline in support for certain cash funds.
Through the first nine months of the year, the company had net income of $6.5 billion, or $0.39 per share after preferred dividends, compared with $5.8 billion, or $1.09 per share a year earlier.Net interest income on a fully taxable-equivalent basis was $11.8 billion compared with $11.9 billion in the third quarter of 2008. The decline was a result of securities sales and lower loan levels. The decrease was partially offset by a favorable rate environment, the addition of Merrill Lynch and higher deposit levels.
Noninterest income rose to $14.6 billion from $8 billion a year earlier. Higher trading account profits, investment and brokerage services fees and investment banking income reflected the addition of Merrill Lynch. Noninterest expense increased to $16.3 billion from $11.7 billion a year earlier. Personnel costs and other general operating expenses rose, driven in part by the Merrill Lynch acquisition.
Reportedly, the results were negatively impacted by continued weakness in the US and global economies and stress on the consumer, which continues to result in high credit costs. Earnings in the quarter were affected by $2.6 billion in pretax mark-to-market and credit valuation adjustments on certain liabilities, including the Merrill Lynch structured notes, and a $402 million pretax charge to pay the US government to terminate its asset guarantee term sheet.
Kenneth Lewis, president and CEO, said: “The company’s core performance was impacted by a number of non-core items. The market’s improved view of Bank of America’s credit cost the company due to non-cash marks on liabilities. Excluding those items, our revenue continued to hold up well. Obviously, credit costs remain high, and that is our major financial challenge going forward.”
