Bank of America Sees `Meaningful Impact’ From Turmoil (Update2)
By Elizabeth Hester
Sept. 17 (Bloomberg) — Bank of America Corp., the second- biggest U.S. bank, said “unprecedented dislocations” in credit markets will have a “meaningful impact” on third-quarter results at its corporate and investment bank.
Trading and other areas of Bank of America’s capital markets and advisory services unit are “being adversely affected by all of these conditions,” Chief Financial Officer Joe Price told investors at a conference in San Francisco today. He cited stress on leveraged finance, subprime mortgages and in the commercial paper market as being especially severe.
“These are quite challenging financial times,” Price, 46, said. “I cannot remember when credit markets in particular have been as volatile and unpredictable as they have been for the last few months
Bank of America joins the growing list of banks and securities firms to warn that the fallout from rising defaults on subprime loans will hurt profit. Merrill Lynch & Co. said last week that “challenging” conditions in fixed-income markets required “fair value adjustments” to certain investments and financing commitments, and any losses will be reflected in third- quarter earnings.
Capital markets and advisory services provided $2.66 billion of Bank of America’s $20 billion of revenue in the second quarter, according to data compiled by Bloomberg. Price said that “in normal times” the unit generates about a third of profit in the company’s corporate and investment bank.
“These are not normal times,” he said.
Flat Profit
Analysts currently expect that Bank of America’s third- quarter profit will be flat compared with last year and earnings per share from continuing operations will rise 3 percent, according to the average estimates in a Bloomberg survey.
Bank of America dropped 44 cents, or less 1 percent, to $49.51 as of 4:16 p.m. in New York Stock Exchange composite trading. The stock was mostly unchanged in after-hours trading.
The company said it expects to close on its purchase of ABN Amro Holding NV’s LaSalle Bank within in a month, after receiving approval from the Federal Reserve last week.
