Bank of America's Q4 profit tumbles

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.