Earnings: BofA, Wachovia, Ambac

Credit woes caused Bank of America and Wachovia’s profits to fall sharply in the fourth quarter. Bank of America’s fourth quarter earnings dropped 95% due to write-offs for subprime credit problems, large trading losses and a loss of consumer confidence. The Charlotte, NC-based bank said that net income for the fourth quarter fell to $268 million, or 5 cents a share, down from $5.26 billion or $1.16 a share, in the year-ago-period. Bank of America said its provision for loan losses jumped to $1.99 billion. Assets under management rose to 17% to $1.74 trillion, up from $1.49 trillion reported a year earlier. "Our fourth quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy," said Kenneth Lewis, Bank of America chairman and chief executive. Wachovia posted a net-income loss of 98% resulting from the bank dramatically raising its loan-loss provision due to a deteriorating lending portfolio. The Charlotte, N.C.-based bank said earnings fell to $51 million, or 3 cents a share, compared to $2.3 billion a year ago. Corporate and investment-banking operations fell to $596 million but the capital-markets business rose 42% to $350 million thanks in large part to the October acquisition of A.G. Edwards. Revenue fell 17% to $7.2 billion from the year-ago period with $1.7 billion in mortgage-related losses. "The continued turmoil in the capital markets and the dramatic change in the credit environment diminished our fourth quarter results substantially," said Ken Thompson, Wachovia chairman and chief executive. In the aftermath of a dive in bond shares, Ambac Financial Group reported large-scale fourth quarter losses. Ambac’s fourth-quarter earnings dropped $3.26 billion, or $31.85 per share from the $202.7 million, or $1.88 a share reported a year ago. The New York-based firm’s operating loss reached $6.21 per share compared to a profit of $1.88 per share in the year-ago period. Ambrac also reported a $5.2 million market-to-market loss on credit derivative exposures. The bleak fourth-quarter report comes nearly a week after shares of Ambac’s bond insurers plunged due to renewed concerns Moody’s Investor’s Services may slash the firm’s AAA rating (InvestmentNews, Jan. 17).