Bank of America loses $5.2 billion as it repays bailout money

BofA loses $5.2B in 4Q as it repays bailout

CHARLOTTE, N.C. — Bank of America Corp. said Wednesday it lost $5.2 billion during the final three months of 2009 as consumers struggled to make mortgage and credit card payments and the bank repaid its government bailout money.

Bank of America said its loss, which reflected the payment of preferred dividends, compared with a loss of $2.4 billion a year earlier. The bank, which was one of the hardest hit by the credit crisis and recession, said its results were boosted by strong results from its Merrill Lynch investment banking operations that it acquired a year ago.

The report fell in line with those of JPMorgan Chase & Co. and Citigroup Inc., both of which had billions in losses from bad loans offset by investment banking income.

Wells Fargo & Co., which reported results Wednesday, posted a $394 million profit although it also had big loan losses during the fourth quarter.

Unlike the other banks, Wells Fargo was more optimistic about a recovery in defaults. The bank said its fourth-quarter loan performance made it more confident that the loan business is starting to improve and that defaults are close to a peak or already have peaked.

The industry’s results are a concern for economists and investors, who question whether the economy can have a sustained strong recovery if consumers are still defaulting on loans.

CEO Brian Moynihan echoed those concerns in a conference call with analysts, saying, “the financial crisis has taken its toll on our company in many ways during 2009.”

The bank said economic conditions remain fragile and the bank expects high unemployment levels to continue.

“We believe we can anticipate positive job growth in 2010,” Moynihan added, “but even with that the number of unemployed will extend the drag on consumer spending and overall economic growth.”

Charlotte, N.C.-based Bank of America lost 60 cents per share during the fourth quarter, more than the 52 cents analysts were expecting, according to Thomson Reuters. Investors appeared little fazed; the bank’s stock was down 7 cents at $16.25 in late morning trading.

The bank set aside $10.1 billion to cover soured loans, down nearly 14 percent from the previous quarter.

Like Citigroup, Bank of America said it saw some signs of improvement in its loan portfolios. The company said it charged off $8.4 billion in loans during the quarter, down $1.2 billion from the third quarter. Loans are charged off when they are considered uncollectible.

But credit costs remained high, with the bank’s credit card unit posting a $1.03 billion loss, well above a $9 million loss a year ago.

The addition of Merrill Lynch supported the bank’s results. But Bank of America said its global wealth and investment management unit saw its net income rise to $1.3 billion in the quarter, up from $515 million a year earlier, driven by the addition of Merrill Lynch.

Bank of America said $4 billion of its fourth-quarter loss came from the costs of paying back $45 billion in government bailout money in December.

JPMorgan Chase, which last Friday reported a $3.28 billion fourth-quarter profit, also said its investment banking earnings offset losses from loans. Many analysts predict loan losses should peak some time in the first half of 2010.

On Tuesday, Citigroup said it lost $7.58 billion in the fourth quarter as consumers continued to struggle to repay loans and the bank repaid its government bailout. The bank said it set aside $8.18 billion to cover bad loans during the most recent quarter.

Moynihan, who became CEO on Jan. 1, has said Bank of America’s decision to pay back the government loans was a major step in bringing back employee and shareholder confidence. It also freed the bank from restrictions on how much it could pay employees.

Bank of America has about 53 million customers, including individual consumers and businesses. That breadth makes BofA particularly vulnerable to high unemployment, which currently sits at 10 percent.

Moynihan, 50, became CEO after Ken Lewis retired.

For the full year, Bank of America lost $2.2 billion, or 29 cents per share. It earned $2.56 billion, or 54 cents per share in 2008.