Bank of America Profits Up but Is It Sustainable?
Accounting gains gave impetus to the third quarter profit made by the Bank of America (NYSE:BAC). However, reports show that its main business faced difficulties, due to income reduction from lending and investment portfolios. A positive aspect was that the shares of the bank rose, because of speculation on the part of analysts and investors, motivated by higher than expected profit and increased quarterly revenue.
Of concern, is the volatile stock factor, which has seen a decline of over 50% since mid-January. Also under consideration, is the fact that asset sales contributed to the ceding by the Bank of America, of its ranking as the largest bank in the United States, to J P Morgan Chase & Co. Other primary banks for example, J P Morgan and Wells Fargo & Co, posted reducing margins, but quarterly profits increased at Wells Fargo and Citigroup Inc.
It is reported that a senior analyst at a credit rating agency, expressed dissatisfaction with the reported results and that “Core earnings appear very suspect”. Further influences related to the Bank of America fortunes, were their recording a USD 9.8 billion pre-tax benefit, derived from two accounting gains and the sale of China Construction Bank Corporation shares.
Reports show that analysts surmise that the USD 2.5 billion purchase of Countrywide Financial Corporation in 2008, by the Bank of America, has cost it over USD 30 billion. This has been due to write-downs, lawsuits with the potential to increase.
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