Bad Loans Drive Down Earnings at Bank of America
Fourth quarter profit fell 27 percent at Bank of America and the company blamed the decline on high loan losses and reduced capital markets business due to a slowing economy.
Quarterly profit dropped from $1.9 billion, or $1.10 a share, to $1.39 billion this year, or 85 cents a share.
Bank of America's 12-month earnings were 4 cents higher per share, from $4.48 to $4.52, but total net earnings dropped from $7.88 billion in 1999 to $7.52 billion last year.
The company said last month that its fourth quarter wouldn't be in line with previous periods. The 1999 fourth-quarter earnings included a $213 million after-tax charge to cover costs associated with the merger of NationsBank and BankAmerica corporations.
Last year, Bank of America's net income was $7.52 billion, or $4.52 per share, compared to $7.88 billion, or $4.48 per share, in 1999. Results in 2000 and 1999 included after-tax charges associated with growth initiatives and mergers of $346 million and $358 million, respectively.
A report released last week by New York investment banking firm Salomon Smith Barney said Bank of America has $4.244 billion in corporate loans that could default in 2001 — more than any other bank in the country.
Bank of America is a participant in three of five of the largest syndicated loans, including:
Owens-Illinois, a Toledo, Ohio-based packaging company, for $4.5 billion,
Finova, a financial-services company in Scottsdale, Ariz., for $4.7 billion, and
J.C. Penney, the retail chain based in Plano, Texas, for $6 billion.
Bank spokesman Bob Stickler said last week Bank of America is one of the most aggressive commercial lenders in the country, meaning it will have more bad loans than more consumer-oriented banks.
While Stickler wouldn't confirm the amount of the loans, he said that $4.244 billion represents 1 percent of the bank's $400 billion loan portfolio.
"As the company projected late last year, loan losses and nonperforming assets increased significantly in the fourth quarter as the economy slowed," Bank of America said in its earnings statement. "Higher provision expense accounted for the majority of the decline in net income."
Net charge-offs for the year totaled $2.4 billion, compared to $2 billion in 1999. Charge-offs for the last quarter were $1.08 billion.
"Nonperforming assets were $5.5 billion, or 1.39 percent of loans, leases and foreclosed properties at Dec. 31, 2000, compared to $3.2 billion, or .86 percent a year earlier," the statement said.
"The increase in nonperforming assets was centered in the commercial domestic portfolio, where nonperforming loans were up $1.7 billion from a year earlier." BACK TO TOP
Citigroup's Profits Rise 11 Percent
Citigroup, the No. 1 U.S. financial services company, said today its fourth-quarter profits rose 11 percent, helped by solid growth in its large consumer banking business.
The company, with banking, insurance and brokerage operations in more than 100 countries, earned $3.33 billion or 65 cents a share, in the quarter, compared with $3.00 billion, or 58 cents, in the year-ago quarter.
Its fourth-quarter 2000 results included $146 million in charges, mostly for a transportation loss provision for the truck loan and leasing portfolio of Associates First Capital Corp., which it bought last November.
Wall Street expected Citigroup to earn 65 cents a share in the quarter, according to First Call/Thomson Financial, which tracks analysts' estimates.
Citigroup had net earnings of $2.84 billion, or 55 cents a share, in the most recent fourth quarter, including another $491 million in charges related to the Associates deal. In the prior-year period, Citigroup earned $3.02 billion, or 58 cents a share, including a one-time $17 million gain.
It earned a record $14.14 billion for the whole year, up 25 percent from a year ago.
Citigroup's far-flung consumer finance operations profited from the company's purchase of leading consumer lender Associates First Capital. The $31 billion deal expanded Citigroup's reach overseas, particularly in Japan, as well as its credit card and commercial finance operations.
However, a fourth-quarter stock market slump hampered growth at its Salomon Smith Barney securities unit, which helps companies with new stock offerings and mergers. Nasdaq posted the worst performance in its history last year, curtailing customers' trading activities and forcing companies to pull planned stock offerings.
Profits at its global consumer group rose 25 percent to $1.47 billion in the fourth quarter, partly lifted by growth in its North American credit cards business and the performance of its Travelers Life and Annuity arm. Core income from banking and lending rose 27 percent in the fourth quarter to $761 million.
Profits at its global corporate and investment bank, which includes Salomon Smith Barney, rose 10 percent to $1.41 billion. At Salomon Smith Barney and its global relationship bank, profits fell 13 percent to $716 million because of an industry-wide slowdown in some investment banking and securities brokerage areas, as well as higher acquisition-related and compensation costs, Citigroup said. Profits from emerging markets corporate banking jumped 72 percent to a record $448 million.
Profits from its money management and private banking business rose 8 percent in the fourth quarter to $163 million, while profits at Associates fell to $289 million, compared with $394 million, after $146 million in charges in the 2000 quarter.
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Intel Meets Wall Street Expectations
Intel Corp.'s fourth-quarter results beat already lowered expectations, as the world's largest chip maker suffered from flagging personal computer sales and forecast first quarter sales would fall about 15 percent from the fourth quarter level.
But strong investment gains helped Intel, which reported income for the quarter ending Dec. 30 of $2.2 billion, or 32 cents per share. Excluding acquisition-related costs, income was $2.6 billion, or 38 cents per share, up from $2.4 billion, or 36 cents per share, in the year-ago period, the company said.
Analysts were expecting comparable results this quarter of 37 cents per share, according to a survey of analysts by First Call/Thomson Financial.
Revenue for the quarter was $8.70 billion, compared to $8.21 billion in the year-ago period.
Shares of Intel finished regular trading down 75 cents to $31.38 on the Nasdaq Stock Market. In after-hours trading, shares crept upward to $31.94.
"This was a year of record annual revenue and earnings; yet, slowing economic conditions impacted fourth-quarter growth and are causing near-term uncertainty," said Craig R. Barrett, president and chief executive officer.
As a result, Intel officials said they expect first quarter revenue to decline by about 15 percent from the fourth quarter, though they maintained a positive outlook.
"We're trying to invest to ensure that we can increase the differentiation from our competitors," Intel chief financial officer Andy Bryant said in an interview. "But when the economy turns up, we'll have the products that consumers will want."
Intel, which serves as a bellwether of the general health of the personal computer industry, had joined other PC makers in December in lowering its earnings forecasts, saying poor PC sales worldwide would lead to flat growth for the fourth quarter.
"They're going to be held up by the same downside of the economy that PC makers are struggling with," said industry analyst Jack Gold of the Meta Group.
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The Associated Press and Reuters contributed to this report.