Laurie Kulikowski
BofA took a $3.31 billion provision in the fourth quarter. It said that higher charge-offs in home equity loans, as well as loans to homebuilders and small businesses, experienced trouble due to the weakness in the housing markets -- this was a large driver of higher credit costs.
The company's net charge-offs totaled $1.99 billion, or just under 1% of total average loans and leases. Losses in the company's average "managed" loans and lease portfolio was $3.31 billion, or 1.34% of the portfolio. BofA is also looking to boost its capital levels this year to regain its target of 8% or more for Tier 1 capital, either through "earnings generation, capital-raising and no net share repurchases," while the dividend should remain sound, Lewis said. At the end of December, BofA's Tier 1 capital was 6.87%, partially due to acquisitions (it purchased LaSalle Bank on Oct. 1) and lower earnings, the company said. "We remain committed to getting back to our 8% target in order to fulfill our needs from the LaSalle and Countrywide acquisitions and to replenish capital for our reduced earnings in the second half of 2007," CFO Joe Price said during the call. "While market conditions will dictate the ultimate timing of our actions, it is our intent to access the markets in the near future, and we have a variety of alternatives available to us. The ongoing earnings impact of these capital actions falls in the 10 cents a share range plus or minus a couple cents, excluding the impact of amounts related to Countrywide." BofA's crosstown rival Wachovia(WB Quote - Cramer on WB - Stock Picks) also had dismal earnings. Wachovia reported fourth-quarter earnings nearly 98% lower than the year-ago period, as the bank suffered massive credit-related hits.
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