BofA Warns of 'Difficult Challenges' Ahead

By Colin Barr, senior writer, Fortune

posted: 134 DAYS 16 HOURS AGO

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NEW YORK (July 17) -- Bank of America joined the ranks of big banks posting better-than-expected first-half profits this week.

The Charlotte, N.C., bank posted second-quarter earnings of $3.2 billion, or 33 cents a share Friday. Bank of America made $3.4 billion, or 72 cents a share, in the second quarter of 2008.

Analysts surveyed by Thomson Financial were looking for a profit of 28 cents a share.

In a statement, BofA chief executive officer Ken Lewis said that posting a profit in "an extremely challenging environment speaks to the diversity and strength of our business model."

Lewis added, however, that "continued weakness in the global economy, rising unemployment and deteriorating credit quality" would impact the company for the remainder of this year and next. But he maintained that "Bank of America will weather the storm and emerge as an acknowledged leader in financial services in the United States and around the world."

The solid report from BofA comes on the heels of strong numbers out this week from BofA rival JPMorgan Chase and trading titan Goldman Sachs.

It also comes at a welcome time for Lewis, BofA's longtime CEO. He has come under fire from shareholders for two acquisitions over the past year of big, deeply troubled financial firms, mortgage lender Countrywide Financial and investment bank Merrill Lynch.

BofA's poor performance in the past year -- the firm has needed $45 billion in loans from the Treasury Department to cope with losses -- and the hubbub over the Merrill deal cost Lewis his chairmanship this spring.

Congress has held three hearings on the behind-the-scenes jockeying that took place in December, in which then Treasury Secretary Henry Paulson told Lewis he would be sacked if he walked away from Merrill as losses there soared.

But the banking industry has appeared to stabilize following a round of capital-raising this spring. BofA has raised some $33 billion in recent months, and the bank's shares have quadrupled off their March lows. The stock was up slightly in pre-market trading Friday, to about $13.26 a share.

2009-07-17 07:11:34