Numbers from Bank of America

Good morning – I hope that everyone had a good weekend.

Bank of America (ticker symbol: BAC) reported its results this morning and they were very good. Profits nearly tripled, largely due to their acquisition of Merrill-Lynch last year. Additionally, revenues more than doubled, again because of Merrill.

However, most of the focus is on two aspects of the Company’s earnings report: on the Firm’s outlook and on the deteriorating credit card business. These latter two points go hand in hand. Ken Lewis, the CEO, said of the Firm’s outlook: “we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment.”

What that statement means is that consumer customers of the Bank continue to lose their jobs and that leads to non-payment on their credit cards. Additionally, because of overall fear about the economy, consumers are spending less money. Less money spent on credit cards means lower balances for Bank of America to collect interest on.

Many investors have been awaiting BAC’s results so that they could gain some insight into how the economic recovery is going. Lewis’s outlook for the future is certain to cause some panic for investors. However, the fact is that the Company reported good results no matter how you choose to slice and dice them. Especially when you consider that just several months ago the discussion surrounding Bank of America was whether or not they would survive the downturn. The talk was of them either being nationalized or of them having to declare bankruptcy.

Overall, I consider this to be a positive report, but feel that credit losses need to continue to be scrutinized.

Jason