Trader Talk

Bank Of America Continues Monday Woes

Monday has not been a great day for bank earnings. Last Monday it was Wachovia that disappointed, today futures dropped at 7 am ET as Bank of Americacame short of expectations.

Considerably short: $0.23 vs. expectations of $0.41. Still, we are once again in the "it could have been worse" mode which proved to be a successful argument for Merrill Lynch and Citigroup .

B of A is more heavily exposed to the domestic economy than some of its competitors. They have by far the largest retail banking operations; they get about half of their revenues from loans and leases. Credit card income is about 10 percent of their revenues. So a lot are looking to them for comments on the state of the consumer.

They didn't say much, but the numbers could have been worse.

The bad news: about $2 b in writedowns for CDOs and leverage loans. The good news: some analysts, including UBS , were expecting much worse: $2-$4 b of losses.

Bad news: credit card losses rose, but (good news!) they were not as bad as some feared.

Surprisingly, they are still making plenty of loans, and deposit growth is strong (as it is at many banks).

More good news: no dividend cuts, no capital raising announcements. Bottom line: it could have been worse. Stock about unchanged.


1) Pharmaceutical companies are continuing to report comparatively poor earnings, on the heels of Pfizer's poor showing last week.

Merckbeat on bottom line, but revenue fell short of expectations, though they did affirm their full year outlook.

Controversial cholesterol lowering drugs Vytorin and Zetia showed significantly slower sales growth. Merck reiterated the full-year guidance they gave earlier in the year. Up 2 percent pre-open.

Lilly fell short of expectations. Sales of antidepressant drug Cymbalta were strong, as was Ciallis sales. But other drugs, including Zyprexa, were lower than expected. Down 2 percent.

2) Halliburton was in line with expectations. International profits were strong (Q1 revenue was up 24 percent outside of North America), and it was somewhat surprising to see North America up 11 percent as well. Up about 1 percent pre-open.

3) National City getting set for $6 b capital infusion from Corsair Capital, according to the Journal. Down 8 percent.

4) Mattel missed, reporting poor growth in the U.S.,somewhat offset by modest growth overseas.

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