Bank of America Receives More Government Aid
As the credit crisis deepens, Bank of America was just granted an additional $20 billion to help prop up their real estate and credit card portfolios. Bank of America just reported a stunning $2.39 billion loss over the most recent quarter. Losses in its capital markets and trading business added to the figures. Sales of financial products also saw a sharp decline across the board.
Bank of America recently acquired credit card giant MBNA. Bad timing indeed, but the deal is done. In the 4th quarter alone B of A lost $204 million. Compare that with MBNA’s 4th quarter profit of $498 million in 2007 and you can see what a sharp contrast in fortune it truly is.
Charge-offs continue to be the primary culprit. A charge-off occurs when the account holder stops paying their credit card bill and the credit card company pretty much gives up on trying to recover their money. In the case of Bank of America (and all other credit card issuers for that matter), the net charge-off rate continues to rise.
As a whole, both foreign and domestic card services saw a sharp rise in credit card delinquencies dating back to 2007. A delinquency occurs when the cardholder is more than 30 days late in paying their bill. A charge-off is more than 90 days overdue. Charge-offs rose to 6.2% in 2008 from 4.8% in 2007.
Bank of America recently acquired financial services giant Merrill Lynch. That cost of that acquisition added to Bank of America’s losses. Earlier this year B of A received $25 billion of the the government’s $700 billion bailout fund.
The three arms of the United States financial system, the Treasury Department, the Federal Reserve Board and the FDIC reaffirmed their commitment to do whatever is necessary to prop up and preserve banks and financial institutions and to help guide the nation through this financial crisis.
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