Credit woes wallop Bank of America profits
The bank's capital markets division, which includes credit and structured products, fell into the red, as a $298m gain in the three months to 30 September last year became a $717m loss in the same quarter this year.
It also took a $607m hit from "breakdowns in traditional pricing relationships, which made hedges ineffective, and the widening of credit spreads" and the bank made a $527m loss on mortgage-backed securities.
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Hide AdOverall, BoA's profits fell from $5.42bn to $3.7bn during the quarter and revenues declined by 12 per cent to $16.3bn. The bank's bad debt provision almost doubled from $1.17bn in the third quarter last year to $2bn.
During the quarter, it gave Countrywide, the biggest US mortgage lender laid low by the crisis in the subprime market, a $2bn injection of capital to prop up its operations.
It also spent $21bn on buying LaSalle from ABN Amro in a deal that became a major sticking point in the battle between Barclays and rival RBS for control of the Dutch bank.
The BoA results follow those of Citigroup, which saw its third-quarter profit drop 57 per cent after a hit of more than $3bn in mortgage-backed security losses, leveraged debt write-downs, and fixed-income trading losses.