BofA, Wachovia profits way down
The credit crisis all but wiped out fourth-quarter earnings at Bank of America Corp. and Wachovia Corp., but the banks did make some money – something that can’t be said for Citigroup and some other Wall Street financial firms.
Profits fell 95 percent at Bank of America and 98 percent at Wachovia.
The numbers, worse than analysts expected, show that the global credit squeeze is still causing more customers to fall behind on their bills and banks to lose money on securities they own.
“The continued turmoil in the capital markets and the dramatic change in the credit environment diminished our fourth-quarter results substantially,” Wachovia Chief Executive Ken Thompson said on a call with analysts.
Last week, the Charlotte, N.C.-based banks saw their Wall Street brethren disclose billions in losses tied to investments in failed mortgages.
On a conference call with analysts, Bank of America’s Chief Executive Ken Lewis said conditions are “the toughest” he’s seen since becoming head of the biggest U.S. consumer bank in April 2001.
“The environment is very tough, and we expect it to remain so for some months to come,” Lewis said.
With the housing and credit markets unlikely to turn around soon, and more disappointing economic news expected, Lewis said it’s time to turn back to a “much more basic strategy.”
Bank of America recorded net income of $268 million, or 5 cents per share, in the three months ended Dec. 31, down from $5.26 billion, or $1.16 per share, a year ago.
Revenue fell 31 percent to $12.67 billion.
Crosstown rival Wachovia said Tuesday that its fourth-quarter profit fell to $51 million, or 3 cents per share, from $2.3 billion, or $1.20 per share, in the same period a year ago.
The news from the two banks was the latest in a series of declines in profit or losses at the largest U.S. financial institutions as the nation’s housing crisis and a slowing economy have forced many consumers to fall behind on their bills.
Last week, JPMorgan Chase & Co., the third-largest U.S. bank, said its profit fell 34 percent to $2.97 billion. Wells Fargo & Co., the nation’s fifth-largest bank, reported that its net income dropped 38 percent to $1.36 billion.
“Apple Inc. blew past Wall Street’s bullish expectations in its first fiscal quarter with a 57 percent jump in profit, but a dramatically lower forecast sent shares plunging on fears about slowing consumer spending on electronics.
The Cupertino, Calif.-based company’s report, released after the market closed Tuesday, reinforced investors’ worries that even a hot company like Apple isn’t immune from sluggishness in the U.S. economy or fears of a recession.
The company forecast a second-quarter profit of 94 cents per share, far short of the $1.09 per share that analysts were expecting.
Revenue is also expected to be lower, coming in around $6.8 billion, compared with the $6.99 billion forecast by analysts.
Apple’s first-quarter net profit was $1.58 billion, or $1.76 per share, for the three months ended Dec. 29. Net income during the same period a year earlier was $1 billion, or $1.14 per share.
“Health care products maker Johnson & Johnson‘s profit rose almost 10 percent in the fourth quarter as revenues jumped by double digits despite sales drops for two key product lines.
The New Brunswick, N.J.-based maker of prescription drugs, medical devices, contact lenses and baby care items on Tuesday reported net income of $2.37 billion, or 82 cents per share, up from $2.17 billion, or 74 cents per share, a year earlier.
Revenues totaled $15.96 billion, up 16.6 percent from $13.7 billion in the year-ago quarter.
Most growth came overseas, with international sales jumping 26 percent and currency exchange rates boosting revenues nearly 5 percent.
“This is as good as it gets for them, and it is not a harbinger for good times in the future,” said analyst Steve Brozak of WBB Securities.
“United Airlines parent UAL Corp. is in “very good position” to pair up with another carrier despite a money-losing fourth quarter, CEO Glenn Tilton said Tuesday.
Tilton wouldn’t tip his hand about the status of talks widely reported to be under way with Delta Air Lines Inc., which is looking at potential combinations with either United or Northwest Airlines Corp.
The fourth-quarter loss of $53 million was less than expected but nevertheless reflected the damage that high oil and jet fuel costs are doing to the bottom line of United and other U.S. airlines.
The company also cited stormy December weather as weighing on results, causing a raft of holiday flight cancellations.
The net loss for the last three months of 2007 amounted to 47 cents a share and was slightly improved from a loss of $61 million, or 55 cents a share, in the same quarter a year earlier.
Revenue was $5.03 billion, up 9.7 percent from $4.59 billion a year ago, partly due to higher fares.