January 22, 2008

BofA Earnings Summary

Today BofA announced their earnings and it was some announcement; 95% earnings decline. Here are the highlight of the call:

  • $5.44 billion trading losses; good thing that investment banking is being pared down. These earnings are volatile and undependable.
  • $5.28 billion CDO and mortgages write down; this write down bring BofA tally of just under $10 billion in write downs over the last two quarters. I think this is it for BofA as they essentially wrote down all their CDO exposure to almost nothing; about 30 cent on the dollar according to their CFO. If the market recovers you can expect a nice jump in earnings.
  • Increased bad loans reserves due to higher possibility of defaults due to slowing economy.
  • On Credit Cards: “We have seen an increase in delinquency in our card portfolio in those states most affected by housing problems. So give you a little insight, the quarter-over-quarter rate of increase in 30-day plus delinquencies in the combined states of California , Florida , Arizona , and Nevada increased over five times the pace of the rest of the portfolio. That group makes up a little more than a quarter of our domestic consumer card book. We have mentioned before that we expect to be in the 5 to 5.5% range for overall consumer card losses for the full year of '08. That compares to the 4.75% we experienced in the fourth quarter”
The bank will continue to face some issues this year but over the long run I still think it is a good business.

The markets are insane going up and down on a whim. I take these opportunities to add to my positions although ever so slightly. Buying in small quantity and periodically makes more sense than going all in at this time.

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