Bank of Americamade it four in a row with big banks beating expectations, and beating big: $0.72 is 40 percent higher than the $0.53 expected. Revenues were a knockout as well: $20.32 billion, 10 percent above the estimate of $18.37 billion.
Highlights:
--Net interest margin (the difference between what you pay out and what you charge) expanded because loan growth grew and there was migration from higher cost CDs into lower cost money market deposits;
--There was loan growth and a well as higher income from service charges, mortgage banking, and investment/brokerage services
--Average retail deposits up 12 percent, half from organic growth and half from the acquisition of LaSalle Bank.
--The dividend was covered, and there was no word on whether it would be cut.
On the downside:
--Credit quality continued to weaken, "particularly in markets that experienced the most significant home price declines."
None of this reflects the Countrywide acquisition, which closed on the first day of the quarter. BofA up 11 percent pre-open. With financials up again this morning, a lot of traders are asking, are banks now overbought? Lots of nervousness about Wachoviatomorrow. Writedown $1.2 billion, less than some analysts expected.
Elsewhere:
1) Bonds are down again on the B of A earnings.
2) Roche bidding for the rest of Genentechthat they don't already own; $89 a share in cash. Roche acquired a majority Genetech way back in 1990; they currently own 55.9 percent of the outstanding shares.
3) Oil service giant Weatherford missed earnings expectations by a couple pennies and is down 4 percent pre-open.
4) Target's2008 and 2009 estimates were lowered at Bank of America, traffic continues to be weak.
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