Bank Investors, This Is Going to Hurt

Loan portfolios showing trouble spots such as home equity, subprime mortgage and homebuilders have "spread" to include first mortgage residential portfolios, unsecured consumer lending and credit card portfolios, BofA said.

The company added nearly $2 billion to its allowance for loan losses in the three months ending Sept. 30.

"The economy has moved to a recessionary environment and the risk of a prolonged recession has increased," BofA said in the earnings release. "Consumers are experiencing higher levels of stress from depreciating home prices, rising unemployment and tighter credit conditions. Higher levels of bankruptcies are occurring and delinquencies and losses have increased in all consumer portfolios."

Citigroup

Citi snuck in third-quarter earnings guidance last Monday on a conference call to discuss its intentions to purchase Wachovia's banking operations. The New York bank said that continued deterioration in consumer credit had a "significant" negative impact on profit this quarter.

Citi's net loss is expected to range between $2.5 billion and $5.1 billion. The company expects credit costs to be as much as $10 billion for the third quarter, up from $7 billion in the second quarter. Citi says roughly half of the increase is due to loan-loss reserve building, primarily due to worsening metrics in its credit card and residential mortgage businesses, while the remaining half is due to higher net charge-offs than the company expected.

The financial titan, one of the worst-hit banks throughout the credit crisis, has taken approximately $61 billion in securities writedowns and credit losses as of the end of September, according to Bloomberg.