BoA (BAC): "Assume Results Will Again Be Quite Disappointing"
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UPDATE: Highlights from Bank of America Corporation (NYSE: BAC) presentation:
- The economy is definitely slowing. We expect weak fourth and first quarters, but at this point we are not forecasting a recession.
- At Bank of America, we currently expect provision expense to be approximately $3.3 billion in the fourth quarter, reflecting increased reserves of about $1.3 billion. In round numbers, about one third of the increase is due to growth and seasoning in our consumer lending portfolios with the remaining two thirds due to deterioration principally in consumer real estate and some in small business.
- A number of participants - including Bank of America - have forecast sizeable writedowns particularly in CDOs. Based on conditions today, we expect those writedowns will be larger than have already been reported - although obviously we won\'t know our final numbers until we close the fourth quarter. We will discuss those numbers on the January earnings call
- our trading revenue has been considerably depressed by the lack of business activity and widening spreads in a number of product categories.
- But to summarize, we then estimated pre-tax CDO writedowns of $3 billion, a $300 million writedown of a mezzanine investment, $600 million in support for cash funds and $230 million for the Visa settlement with Amex.
- While we do not make a practice of forecasting quarterly earnings, I think you certainly can assume results will again be quite disappointing. At this point, the final writedowns of CDOs are unknowable, but we expect to be profitable in the fourth quarter.
- We expect to rebuild Tier One capital to our 8% target, but with higher capital markets losses and provision expense, we may not now be able to resume buybacks until 2009 instead of the second half of next year as we had hoped.
- The economy is definitely slowing. We expect weak fourth and first quarters, but at this point we are not forecasting a recession.
- At Bank of America, we currently expect provision expense to be approximately $3.3 billion in the fourth quarter, reflecting increased reserves of about $1.3 billion. In round numbers, about one third of the increase is due to growth and seasoning in our consumer lending portfolios with the remaining two thirds due to deterioration principally in consumer real estate and some in small business.
- A number of participants - including Bank of America - have forecast sizeable writedowns particularly in CDOs. Based on conditions today, we expect those writedowns will be larger than have already been reported - although obviously we won\'t know our final numbers until we close the fourth quarter. We will discuss those numbers on the January earnings call
- our trading revenue has been considerably depressed by the lack of business activity and widening spreads in a number of product categories.
- But to summarize, we then estimated pre-tax CDO writedowns of $3 billion, a $300 million writedown of a mezzanine investment, $600 million in support for cash funds and $230 million for the Visa settlement with Amex.
- While we do not make a practice of forecasting quarterly earnings, I think you certainly can assume results will again be quite disappointing. At this point, the final writedowns of CDOs are unknowable, but we expect to be profitable in the fourth quarter.
- We expect to rebuild Tier One capital to our 8% target, but with higher capital markets losses and provision expense, we may not now be able to resume buybacks until 2009 instead of the second half of next year as we had hoped.
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