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WASHINGTON: Deeper-than-expected losses reported on Wednesday by Bank of America and Morgan Stanley dampened the mood for a banking sector struggling to get out from bailouts and the financial crisis.
Bank of America, the largest US bank by assets, posted a loss of 194 million dollars in the fourth quarter of 2009, but repayments of government aid boosted the loss for shareholders to 5.2 billion dollars.
For all of 2009, the largest US bank by assets listed a profit of 6.3 billion dollars, but for shareholders the results were a loss of 2.2 billion following payments to the US Treasury stemming from bailout aid.
The last quarter's results were affected by a charge of 4.0 billion dollars to repay the US government for its capital aid under the Troubled Asset Relief Programme (TARP), a massive effort to stabilise the banking system, Bank of America said.
"While it's disappointing to report a loss for the fourth quarter, there were a number of important accomplishments worth noting," said chief executive Brian Moynihan.
"First, we repaid the American taxpayer, with interest, for the TARP investment. Second, we have taken steps to strengthen our balance sheet through successful securities offerings. And third, all of our non-credit businesses recorded positive contributions to our results."
Moynihan added: "As we look at 2010, we are encouraged by signs the economy is improving, as we have seen in the stabilisation of our credit costs, particularly in the consumer businesses.
"That said, economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth."
Analysts at Deutsche Bank called the Bank of America results "lumpy," and cited "disappointments" in areas such as fee income.
Morgan Stanley meanwhile reported a profit of 617 million dollars in the fourth quarter, but little was left for shareholders of the investment giant that was rescued by an infusion from Japan's Mitsubishi UFJ Financial Group.
The profit applicable to common shareholders was just 376 million dollars in the quarter.
For all of 2009, the posted profit was 1.346 billion dollars but shareholders suffered a loss of 907 million dollars.
Morgan Stanley's chief executive and president James Gorman said he was confident that the bank would improve its position further as the economy recovered from the worst recession in decades.
"While the environment remains extremely fluid, we are confident the steps we have taken this year will ensure that Morgan Stanley remains well-positioned to serve our clients, seize new opportunities in the markets and deliver superior returns to our shareholders in the years ahead," he said.
Gorman, along with chairman John Mack, agreed to forgo bonuses for 2009 due to the sector's woes.
Joe Weisenthal, analyst at the financial website Clusterstock, said the results followed a pattern set by JPMorgan Chase and Citigroup, which reported losses for their lending operations offset by gains in other areas such as trading and investment banking.
"The losses are raising concerns about the impact of credit problems on the economic recovery," he said.
Another major bank, Wells Fargo posted net income of 2.82 billion dollars in the fourth quarter on record revenue of 22.7 billion dollars.
For the full year, Wells Fargo said it had net profit of 7.99 billion dollars on record revenue of 88.7 billion dollars.
The financial results partly reflected the California-based bank's takeover of Wachovia on December 31, 2008, making Wells Fargo the fourth-largest bank by assets in the United States. The bank said it had 1.2 trillion dollars in assets at the end of 2009.
Most major banks have repaid the government's TARP injections, although Citigroup has converted some of that to common stock.
Bank of America, which weathered the financial crisis with 45 billion dollars in government aid after it absorbed troubled brokerage Merrill Lynch and home lender Countrywide Financial, said results were hurt by high credit costs, offset in part by gains in investment banking and trading.
The group repaid the entire TARP injection in December, after raising fresh capital in the markets. - AFP/de
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