CreditCards.com

Living with credit, Research, regulation, industry reports

Bank of America’s Q4 profit tumbles

Jeremy Simon

Bank of America announced that its fourth-quarter net income tumbled amid problems in the capital markets and a slowdown in the U.S. economy. Among the main reasons for the earnings decline, BofA said its provision expense rose $1.74 billion, “largely due to a $1.33 billion addition to the reserve for credit losses.” Additionally, net charge-offs (loans the bank thinks it will be unable to collect) increased to 0.91% from 0.82% a year earlier.

Consumers continued to use credit cards in 2007. For the full year, in the card services unit “net revenue grew 4 percent to $25.53 billion due to growth in cash advance fees and interchange income while net income of $3.71 billion was down 35 percent as credit costs rose,” Bank of America said.

Looking ahead, Chairman and Chief Executive Kenneth D. Lewis said BofA is “cautiously optimistic about 2008, though we believe economic growth will be anemic at best in the first half.”

Separately, Bank of America cut its prime-lending rate to 6.50 percent from 7.25 percent in the wake of the Federal Reserve’s surprise decision to lower interest rates by 3/4 of 1 percent. That should produce lower annual percentage rates for BofA cardholders.

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, we ask that you do not disclose confidential or personal information such as your bank account numbers, social security numbers, etc. Keep in mind that anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.