Part three of your third-quarter US bank earnings season is out.
On Tuesday, Bank of America announced a net loss of $7.3bn for Q3 2010, including a goodwill impairment charge on its card services biz of $10.4bn. On an adjusted basis the figures look much cheerier — net profit of $3.1bn, or $0.27 per diluted share. Consensus was for $0.16 per share, adjusted. Another beat, then.
Watch those forward-looking risk factors though — we’ve spotted a new one:
Bank of America and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” or other words of similar meaning. The forward-looking statements made represent Bank of America’s current expectations, plans or forecasts of its future results and revenues, including future risk-weighted assets and any mitigation efforts to reduce risk-weighted assets, representations and warranties reserves, expenses and repurchase activity, net interest income, credit trends and conditions, including credit losses, credit reserves, charge-offs, delinquency trends and nonperforming asset levels, consumer and commercial service charges, including the impact of changes in the company’s overdraft policy as well as from the Electronic Fund Transfer Act, the company’s ability to mitigate a decline in revenues, liquidity, regulatory and GAAP capital levels, including complying with any Basel capital requirements without raising additional capital, revenue impact of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the CARD Act), revenue impact resulting from and any mitigation actions taken in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Financial Reform Act), mortgage production levels, long-term debt levels, runoff of loan portfolios, the number of delayed foreclosure sales and the resulting financial impact, and other similar matters. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Bank of America’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.
Ah — the foreclosure mess. Bank of America is the only financial to have suspended foreclosures in all 50 US states, though the bank expects to restart the process next week. Still, expect plenty of questions on this subject in the conference call.
Some other highlights, from the statement:
CHARLOTTE, N.C.–(BUSINESS WIRE)–Bank of America Corporation today reported a net loss of $7.3 billion, or $0.77 per diluted share, in the third quarter of 2010, including a non-cash, non-tax deductible goodwill impairment charge of $10.4 billion. Excluding this charge, net income was $3.1 billion, or $0.27 per diluted share, compared with a net loss of $1.0 billion, or $0.26 per diluted share, in the third quarter of 2009.
About the Goodwill Impairment Charge
As previously announced, the goodwill impairment charge is a non-cash, non-tax deductible charge applicable to the Global Card Services segment. The goodwill impairment charge does not impact regulatory capital or tangible equity ratios or liquidity, and has no impact on the company’s ability to serve its customers and clients around the world. The charge results from the limits to be placed on debit interchange fees under the financial reform legislation enacted in July 2010, which will reduce future revenues in the Global Card Services business.
1 Excluding the goodwill impairment charge from certain financial measures represents a non-GAAP measure. For reconciliation to GAAP measures, refer to page 21 of this press release.
Operating Results
Third-quarter 2010 results compared to a year ago benefited from lower credit costs, higher net interest income due in part to the adoption of new consolidation guidance on January 1, 2010, and increases in other income, mortgage banking income and card income. These improvements were partially offset by lower service charges, lower trading account profits and a decrease in insurance income.
“Our results this quarter demonstrate continued traction with each customer group – consumers, businesses, and institutional investors,” said President and Chief Executive Officer Brian Moynihan. “Our strategy is to leave nothing to chance in our goal of doing everything we can for each of our customers.
“We are adapting to the regulatory environment, credit quality continues to improve, and we are managing risk and building capital. We are realistic about the near-term challenges, and optimistic about the long-term opportunity.”
Third-Quarter Business Highlights
* Bank of America continued to leverage its global franchise. Through the third quarter of 2010, approximately 200,000 loan and deposit products have been sold to Bank of America Merrill Lynch customers. In addition, referrals between Global Wealth and Investment Management and the company’s Global Commercial Bank and Global Banking and Markets businesses totaled approximately 3,500 in the third quarter and approximately 10,700 year to date. The company’s retirement business continues to win more business.
* Global Wealth and Investment Management reported strong growth in client assets driven by higher market prices and increased inflows into higher-yielding products. These included a $14 billion increase in deposits and a $6 billion increase in long-term assets under management. Global Wealth and Investment Management increased the number of its client-facing associates for the fifth consecutive quarter.
* Bank of America Merrill Lynch ranked No. 2 in global investment banking revenues with a 7 percent market share, according to Dealogic’s third-quarter 2010 league tables. The company has No. 1 positions in both global and U.S. rankings in leveraged loans, syndicated loans, mortgage- and asset-backed securities and high-yield corporate debt.
* Bank of America Merrill Lynch participated in five of the top 10 merger and acquisition transactions in the third quarter. The company had the lead role in the largest U.S. equity deal this year (Metlife) and was the global coordinator for the largest equity deal in history (Petrobras).
* Bank of America continued to support the economic recovery by extending approximately $173 billion in credit in the third quarter of 2010, according to preliminary data. Credit extensions included $72 billion in first mortgages, $80 billion in commercial non-real estate, $11 billion in commercial real estate, $3 billion in domestic consumer and small business card, $2 billion in home equity products and $5 billion in other consumer credit. Commercial credit extensions include a significant number of credit renewals.
* The $72 billion in first mortgages helped nearly 322,000 people either purchase homes or refinance existing mortgages. This included approximately 17,000 first-time homebuyer credit-qualified mortgages and more than 103,000 mortgages to low- and moderate-income borrowers. Approximately 36 percent of funded first mortgages were for home purchases and 64 percent were refinances.
* Since the start of 2008, Bank of America and previously Countrywide have completed nearly 700,000 loan modifications with customers. During the third quarter, nearly 50,000 loan modifications were completed, including 13,000 consumers who converted from trial modifications under the U.S. government’s Making Home Affordable Program.
* Recognizing that small businesses are an important engine for economic activity, Bank of America recently announced plans to hire more than 1,000 small business bankers through early 2012 to provide personalized deposit, credit and cash management solutions to small business owners.
* Overall consumer customer satisfaction with Bank of America continued to improve in the third quarter of 2010 as a result of a continued focus on customer service, including several new programs designed to enhance responsiveness to customer questions and concerns.
* Average retail deposit balances rose 2 percent from the year-ago period to $633 billion, excluding the reduction associated with the completed sale of First Republic Bank during the quarter. Strong growth in Bank of America Merrill Lynch Global Wealth Management drove the increase.
Next up this Tuesday — one Goldman Sachs.
Related links:
Citigroup posts Q3 2010 profit of $0.07 a share - FT Alphaville
JP Morgan Q3 EPS beats expectations at $1.01 - FT Alphaville
Your guide to US bank earnings season - FT Alphaville