Are banks in North Carolina worth it
Crisis eats up profits from Bank of America and Wachovia
By Reuters Staff
New York (Reuters) - Billions in write-downs due to the mortgage crisis almost completely eroded the profits of the two US banks Bank of America and Wachovia in the fourth quarter of 2007.
In addition, a drastic increase in risk provisioning for impending loan defaults in the consumer credit business had an impact at both institutes.
The North Carolina-based Bank of America (BOA) had a net profit of $ 268 million after revaluations of $ 5.3 billion. A year earlier, the institute had earned $ 5.26 billion. "We are certainly not satisfied with our business," said BOA boss Kenneth Lewis. For 2008, the second largest bank in the US is “cautiously optimistic”.
CFO Joe Price announced a capital increase for the near future in order to strengthen the recently significantly weakened capital base. In October, the institute took over LaSalle Bank, and the ailing mortgage financier Countrywide is still pending for around four billion dollars.
At the competitor Wachovia the profit in the final quarter shrank to 51 million dollars together after 2.3 billion dollars a year earlier. The fourth largest US institute had to cope with burdens of 1.7 billion dollars due to the mortgage crisis. Some of the losses came from the California mortgage financier Golden West, which Wachovia acquired in October 2006 for a good $ 24 billion.
The news from Wachovia put the mood down on Wall Street. The papers lost a good three percent in value. The BOA shares, however, turned slightly into positive territory after initial losses.
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