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An analyst has reversed his assessment that Bank of America will incur a $12 billion pretax charge in the first quarter of 2010 tied to how it records credit card losses.
Jefferson Harralson, an analyst at Keefe, Bruyette & Woods, had written on Monday that the expected charge related to $150 billion of credit card receivables, home equity securitizations and asset-backed conduits that would move onto the largest U.S. bank's balance sheet.
But on Tuesday, he wrote that "we understand the reserve building costs of bringing about $150 billion in assets onto the balance sheet will be an adjustment to capital," and not filter to the bottom line.
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Sharon Lorimer |
As a result, he said the bank should in 2010 report a profit of 80 cents per share, not the loss of 10 cents per share he had projected on Monday.
Bank of America's [BAC
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] credit card unit lost $1.62 billion in the second quarter, limiting overall net income for the three-month period to $3.22 billion.
Chief Executive Kenneth Lewis said new credit card rules in 2010 could reduce card revenue that year by $700 million.
JPMorgan Chase [JPM
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] Chief Executive Jamie Dimon made a similar forecast for his bank, the nation's second-largest.
Harralson has an "outperform" rating and 12-month price target of $16.50 for Bank of America, which is based in Charlotte, North Carolina.
The bank's shares fell 14 cents to $12.10 in afternoon trading on the New York Stock Exchange.
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