Mixed Bag From BAC

Updated from 4:00 p.m. EDT on April 18.

Bank of America (BAC - commentary - Cramer's Take) reported first-quarter 2008 financial results this morning before the bell, and, as feared, some of the numbers were worse than expected, although there were a few positive items as well.

EPS of 23 cents was well below the consensus estimate of 41 cents, while net revenue of $17.3 billion was almost $800 million greater than the $16.5 billion consensus estimate for the bank. All of the writedowns in the collateralized debt obligation and leveraged loan book and also the home equity, small business and homebuilder portfolios (provision expense increased from $4.78 billion to $6 billion) were expected, and maybe even better (or less worse) than expected, per one analyst.

Despite the 60% drop in global consumer banking earnings, net revenue here (excluding the Visa (V - commentary - Cramer's Take) gain) was 3% higher sequentially in the consumer division, and non-interest income (also excluding Visa) rose 21% year over year -- both better than expected, particularly since global consumer net revenue usually declines sequentially from fourth quarter to first quarter. The Visa IPO generated a $700 million gain for Bank of America in the quarter.

Retail deposit growth grew 2.3% sequentially and, per Ken Lewis on the call, was indicative of Bank of America taking share. The credit and capital markets numbers were bad, while some of the unrelated consumer and corporate segments showed good growth. The question remains as to whether Bank of America is diversified enough to offset some of the deteriorating credit concentrations with growth in other areas.

Tier I Capital actually rose, from 6.8% in fourth quarter 2007 to 7.15% in first quarter 2008. On the conference call, Ken Lewis went out of his way to say that it is liquidity in addition to capital that determines bank credit-worthiness, and he went on to say that Bank of America has 20 months of liquidity available.

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At the time of publication, Gilmartin had no positions in the stocks mentioned, although positions may change at any time.

Brian Gilmartin, CFA, founded Trinity Asset Management (TAM) in 1995, where he is currently a portfolio manager. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gilmartin appreciates your feedback; click here to send him an email.