Bank of America hit by two billion dollar writedown of Countrywide!
LONDON, England - January 21, 2011 - Bank of America slumped to a loss in the final three months of 2010 as its rescue of mortgage lender Countrywide left it exposed to the wrong end of America's housing market.
The biggest bank in the U.S. by assets reported a loss of $1.24 billion in the fourth quarter, after writing down the value of Countrywide, once the country's biggest mortgage lender, by $2 billion. Ken Lewis, Bank of America's former chief executive, acquired Countrywide for what was then touted as a cut-price $4 billion in 2008. The deal has also saddled Bank of America with a wave of legal problems for which the lender may need to set aside a further $7-$10 billion to resolve, according to finance director Charles Noski.
Lewis's successor, Brian Moynihan, insisted that "last year was a necessary repair and rebuilding year" and that the results "reflect the progress we are making at putting legacy - primarily mortgage-related - issues behind us."
The performance of Bank of America's shares suggest that investors remain sceptical. After declining 11.4% last year - the second-worst performance by any of the country's major banks - they closed down 0.29 at $14.25.
The bank, which is based in Charlotte, North Carolina, also saw profits at its global banking and markets business drop to $724 million in the quarter, from $1.44 billion a year earlier. The weaker quarter for trading has been seen across Wall Street. Moynihan told Bloomberg that "we weren't happy with the numbers, we'd like to make more money".
Bank of America's commercial banking business was a brighter spot, reporting a profit of $1.04 billion for the last three months of the year compared with a loss of $31 million a year earlier. The amount put aside for bad loans dropped by almost $2 billion, and analysts say that an improving economy should accelerate that trend.
