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Bank of America, the nation's second-largest bank, reported rising credit costs Tuesday, as it continues to wade through a challenging economic cycle.
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Oliver Quillia for cnbc.com Bank of America branch, New York City. |
] in the third quarter. At an investor conference in New York, Liam McGee, Bank of America's president of global consumer and small business banking, said customers are feeling "significant economic pressure" as deflating home prices leave little equity for consumers to borrow against.
The Charlotte-based company said it expects losses in its home equity portfolio to increase in the near-term and projected future losses in that area that exceed the bank's earlier range of 2 percent to 2.5 percent.
"It will be higher than 2.5 percent," said McGee, adding that California and Florida are driving losses within the consumer-credit business. "I think we are doing all the right things to mitigate it and we will just have to manage through it."
Shares [BAC
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To offset pressure from market turmoil, McGee said Bank of America has targeted what it calls the "mass affluent" consumer segment as its largest growth category. The segment, which includes consumers with $100,000 to $3 million to invest, accounts for 23 percent of the bank's total households and holds more than $500 billion in deposits at other firms.
The company also sees so-called affinity accounts helping put its credit card segment in position for growth. Such accounts are linked with sports teams, alumni and special-interest groups, among others. McGee noted that the bank's affinity portfolio has been demonstrating "superior credit quality."
What will also help, McGee said, is Bank of America's acquisition of California lender Countrywide.
While admitting the company had not anticipated some challenges of the current economic environment, McGee called the pending purchase "positive" and "significant," adding that it will give Bank of America "leadership in home lending."
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