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Bank of America investors react to earnings

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Published April 20, 2009 at 10:04 AM
bankofamerica.gifBank of America Corp.'s (NYSE:BAC) earnings topped analysts' expectations, but investors are still not pleased with the recent moves made by CEO Ken Lewis.

In premarket trading, Bank of America's stock fell 5.7% and sunk to 8% as the market opened. Why? Nonperforming assets totaled $25.74 billion, up 41% from last year, according to Reuters. 

As the earnings press release states:

"The provision for credit losses of $13.4 billion rose from $8.5 billion in the fourth quarter and included a $6.4 billion net addition to the allowance for loan and lease losses. Reserves were added across most consumer portfolios reflecting increasing economic stress on consumers. Reserves were also increased on commercial portfolios. Nonperforming assets were $25.7 billion compared with $18.2 billion at December 31, 2008 and $7.8 billion at March 31, 2008, reflecting the continued deterioration in portfolios tied to housing. The 2009 coverage ratios and amounts shown in the following table include Merrill Lynch."

As unemployment rises, Bank of America could hurt the bank and the rest of the industry, according to The Wall Street Journal.

How are investors reacting?

Walter Todd, a portfolio manager at Greenwood Capital Associates LLC, which invests $650 million and owns Bank of America shares told Reuters, "The biggest question I have is, what is going on with these nonperforming assets?"

Richard Eliasberg, an investor in BofA, told New York Times DealBook, "For the first time, I'm disappointed." 

Meanwhile, two more proxy-advisory firms, RiskMetrics Group and Glass Lewis & Co., joined Proxy Governance along with The CtW Investment Group and Finger Interests Number One Ltd., which is lobbying fellow shareholders to oust chief executive Ken Lewis and two other board members. Service Employees International Union also released a four-minute video on Thursday urging BofA shareholders to "fire Ken Lewis," according to the Financial Times.

Egan-Jones Proxy Services, on the other hand, is asking shareholders not to back a proposal to have separate Lewis' chairman and chief executive roles, saying it is up to the board to determine that, according to The New York Times. 

Dealscape invited Jonathan Finger by to discuss the proxy against Lewis along with Bank of America earnings. Finger said that the positive first-quarter earnings won't keep him from pursuing his proxy fight. See the video below. - Maria Woehr




Also see:
Jonathan Finger on why BofA's Lewis must go
Ken Lewis has one foot out the door
BofA's Lewis' time almost up
BofA's first quarter tops all of 2008
See BofA results
See Corporate Dealmaker post on Merrill integration
See BofA earnings preview
See Deal Video interview with Finger Investments
See Dealscape post on Citi's results

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