Bank of America Corp., the biggest U.S. home lender after buying Countrywide Financial Corp., reports earnings next week amid concern the acquisition has added to losses on credit-card and home-equity loans, Bloomberg News reports.
Bank of America is likely to say on July 21 that second- quarter per-share profit fell 59%, according to estimates of 21 analysts compiled by Bloomberg. A year earlier, the Charlotte, North Carolina-based bank earned $5.76 billion, the best quarter in the company's history.
Impressing investors may be tougher after Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. reported better-than expected quarterly results. Citigroup posted a smaller-than- estimated loss of $2.5 billion today and JPMorgan's decline beat analysts' predictions. Wells Fargo's July 16 earnings, which also exceeded estimates, sparked a two-day buying frenzy that boosted Standard & Poor's 500 Banks Index more than 30 %.
``I still wouldn't put Bank of America in the same camp as JPMorgan or Wells Fargo,'' Chris Hagedorn, a portfolio manager at Fifth Third Asset Management in Cincinnati told BN. ``The biggest concern for me is that, of the major diversified financials, they have the lowest reserve levels.''
The lender may need to raise $10 billion to boost its capital because of rising losses on loans acquired in the Countrywide transaction, KBW Inc. analyst
Jefferson Harralson wrote in a report today. Investors expect a cut in the bank's dividend, which now yields 10 %, he wrote.
Chief Executive Officer Kenneth Lewis pressed ahead with the Countrywide purchase in the face of investors' criticism of the $2.5 billion stock swap. Lewis said July 9 he sees ``no reason to cut the dividend and no reason to raise any more capital.''
The bank completed the Countrywide deal on July 1, a day after the end of the second quarter, so the mortgage company's earnings aren't likely to be included in the second-quarter results. The bank will discuss the implications of the Countrywide purchase on July 21, spokesman Scott Silvestri said, declining further comment.
``A lot of people are extremely worried about what's going to come out of Countrywide,'' said Steve Gutch of Clover Capital Management in Rochester, New York to BN. ``It's not only the operating issues but then you have all of the legal problems.'' Countrywide faces investigations by U.S. regulators and lawsuits about whether its lending practices deceived borrowers.
