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Bank of America, the biggest lender in the US, lost $2.2 billion (£1.35 billion) in the third quarter — more than Wall Street had been expecting.
But chief executive Ken Lewis who is standing down at the end of this year said: “Obviously credit costs remain high and that is our major financial challenge. However, we are heartened by early positive signs, such as the levelling of delinquencies among our credit card customers.”
BoA bailed out both the mortgage giant Countrywide and investment bank Merrill Lynch last year taking them over for $4.1 billion and $19 billion respectively.
But today's figures disappointed analysts as losses in retail banking outweighed any benefits a recovery in financial markets might have had on investment banking.
It cost Bank of America $402 million to extract itself from the US government's asset protection scheme. It suffered $2.6 billion of write-downs on the value of its own and Merrill's debt during the quarter.
Losses per share were 26 cents which was far higher than the 12 cent loss which was the average analysts had been forecasting. The net loss of $2.2 billion compares with a profit of $1.2 billion in the same quarter last year.
The bigger-than-expected loss came as a terrible blow after rivals JP Morgan and Goldman Sachs reported higher-than-expected profits this week. But Citigroup's disappointing profits yesterday reminded investors that banks with a major presence in Main Street USA are still suffering from low consumer demand for their products and customers who are struggling to pay their loans. The bank took a $2.1 billion hit on further bad loans.
Lewis said that despite the loss, Bank of America had strengthened its reserves, capital position and liquidity during the quarter through efficient management of its balance sheet and capital.
