Bank of America Corp., reports a fourth-quarter net loss of $2.39 billion, or 48 cents per diluted share. The news comes on the same day the Charlotte-based bank says it will slash its dividend to one cent per share from 32 cents and accept an additional $20 billion in bailout money.
The federal funds are in addition to the $25 billion BofA has already received under the Troubled Asset Relief Program, which is designed to unfreeze the credit markets and boost the economy.
BofA earned $215 million, or 5 cents per diluted share, in the fourth quarter of 2007.
The latest figures include results from Countrywide Financial Corp., which BofA purchased on July 1, but not Merrill Lynch & Co. Inc., which it purchased Jan. 1.
Net interest income rose to $13.1 billion in the latest quarter from nearly $9.17 billion in the fourth quarter of 2007. Total noninterest income fell to $2.57 billion from $3.64 billion in the same period.
BofA (NYSE:BAC) says fourth-quarter results were driven by escalating credit costs, including additions to reserves, and significant writedowns and trading losses in its capital-markets businesses.
"These actions reflect the deepening economic recession and extremely challenging financial environment, both of which significantly intensified in the last three months of 2008," BofA says.
BofA's provision for credit losses rose to $8.54 billion from $3.31 billion in the fourth quarter of 2007.
Global consumer and small-business banking and global wealth and investment management were profitable, boosted by BofA's expanding deposit business. However, BofA says negative results in capital markets and advisory services offset the bank's profitability in business lending and treasury services, which are part of BofA's global corporate- and investment-banking division.
Merrill Lynch's preliminary results indicate a fourth-quarter net loss of $15.31 billion, or $9.62 per diluted share, driven by severe dislocations in the capital markets.
As part of BofA's acquisition of Merrill Lynch, federal officials have given BofA an additional $20 billion in funds. The government also has agreed to provide protection against further losses on $118 billion in capital-markets exposure, primarily from the Merrill Lynch portfolio.
Under the agreement, BofA would cover the first $10 billion in losses and the government would cover 90 percent of any subsequent losses. BofA has agreed to pay a premium of 3.4 percent of those assets.
The latest assistance from the U.S. Treasury Department and the Federal Deposit Insurance Corp. come amid growing concerns about BofA's financial condition.
Federal officials announced the deal early this morning.
BofA's stock, which has traded between $7.35 and $45.08 over the last year, closed at $8.32 per share Thursday, down from Wednesday's closing price of $10.20. It dropped another 13.7 percent Friday, closing at $7.18 per share.
For the full year, BofA earned $2.56 billion, or 55 cents per diluted share, down from $14.8 billion, or $3.30 per diluted share.
Net interest income rose to $45.36 billion from $34.44 billion in 2007. Total noninterest income fell to $27.42 billion from $32.39 billion in the same period.
An Italian court has acquitted Bank of America Corp. of charges related to events before April 2002 in a trial of five banks, Dow Jones Newswires reports. The case revolves around the collapse of Parmalat Finanziaria SpA, the Italian dairy conglomerate that collapsed in December 2003 in one of Europe's biggest financial scandals.
An Italian judge ordered BofA to go to trial on allegations that it failed to prevent three former employees from market rigging in connection with Parmalat. The former employees faced charges for vetting a news release issued by Parmalat in 1999 that Italian regulators claim was misrepresentative.
The charges against Charlotte-based BofA (NYSE:BAC) were administrative. Italian law stipulates that a company can be charged for not having proper governance in place to prevent illegal actions.
The other banks ordered to go to trial by Judge Cesare Tacconi were Citigroup Inc. (NYSE:C), Morgan Stanley (NYSE:MWD), Deutsche Bank AG (NYSE:DB) and UBS AB (NYSE:UBS). The banks have denied any wrongdoing.
According to Dow Jones Newswires, the Milan court acquitted BofA of charges related to events before April 2002, because at the time the law that attributes administrative responsibilities to companies wasn't in place yet.
Occupancy at Charlotte-area hotel rooms fell to 49 percent in November, down 17 percent from a year earlier.
According to data from the Charlotte Regional Visitors Authority, local hotel occupancy fell 8.2 percent in the first 11 months of last year to 61.6 percent.
By comparison, in the first 11 months of 2008, hotel occupancy fell 4 percent in the United States and 6.6 percent in North Carolina.
The average room rate in the Charlotte area fell 1 percent to $81.40 in November.
For the first 11 months in 2008, the average daily rate was $87.36, up 4.9 percent from the same period in 2007.
That's more than the 3.7 percent increase in North Carolina and 2.8 percent increase nationwide.
Charlotte-market revenue per available room was $40.59 in November, down 17.7 percent from the same month in 2007.
In the first 11 months of the year, revenue per available room was $53.81 in the Charlotte area, down 3.7 percent from the same period in 2007.
It declined 1.3 percent in the United States and 3.1 percent in North Carolina in the same period.
The Matthews-based discount chain has declared a quarterly cash dividend on its common stock of 13.5 cents per share, payable April 15 to shareholders of record on March 13.
The company's previous quarterly cash dividend was 12.5 cents per share.
"Increasing our dividend for the 33rd consecutive year reflects our confidence in the long-term growth opportunity for Family Dollar," says Howard Levine, chief executive.
Last week, the company reported a 14.1 percent increase in earnings for its first fiscal quarter ended Nov. 29.
Family Dollar earned $59.3 million, or 42 cents per diluted share, up from $51.9 million, or 37 cents per diluted share, a year earlier.
Revenue rose 4.2 percent to $1.75 billion, and comparable-store sales increased 2.1 percent.
Family Dollar (NYSE:FDO) operates more than 6,600 stores in 44 states.
Swedish home-furnishings giant Ikea is putting the final touches on its first Carolinas store, which opens in five weeks in the University area.
The 356,000-square-foot store will be one of the chain's largest. It will feature three model homes and 49 room vignettes, including 17 kitchens. Shoppers will be able to buy more than 10,000 exclusively designed products - from furniture to art, tableware and even food.
Ikea is known for low-priced furnishings that customers assemble at home.
But it has expanded its offerings and services in recent years. For example, complete kitchen setups can be purchased from about $1,800 to $3,800, including Ikea-branded appliances, cabinets and countertops.
Ikea now offers on-site designers to help shoppers create complete rooms, take measurements and recommend contractors to assemble the furniture. The store also can arrange home delivery.
And customers can rent vans at the store to take their purchases home.
"We've taken a product that is pretty good and made it fantastic," says Joseph Roth, Ikea spokesman.
Most of the store's 400 employees have been hired and are working to assemble the furniture and displays. The store is opening ahead of schedule on Feb. 18, anchoring a new Crescent Resources development off the newly created City Boulevard exit on Interstate 85.
Roth says it normally takes up to 13 months to open an Ikea store. The company broke ground for the Charlotte Ikea in April and expects to open within 10 months. Roth says the accessibility of the site and good weather contributed to the fast pace of construction.
Shoppers can start lining up 24 hours before the opening. Ikea openings can attract several thousand shoppers for a grand opening.
Ikea, founded in 1943, is a privately owned retailer based in Helsingborg, Sweden. Its U.S. sales in 2008 topped $3.2 billion. The chain has more than 280 stores around the world
Bank of America Corp.'s stock, which had already dropped more than 27 percent this month, fell another 18 percent in Thursday trading.
BofA's stock, which has traded between $10.01 and $45.08 over the last year, closed at $8.32 per share Thursday, down from Wednesday's closing price of $10.20.
The drop in value follows a report from The Wall Street Journal late Wednesday that the federal government may commit billions more in aid to BofA as it acquires Merrill Lynch & Co. Inc.
According to the report, which cites individuals familiar with the situation, discussions over the funds began last month when BofA told the U.S. Treasury Department it might not acquire Merrill because of the securities firm's larger-than-expected losses in the fourth quarter.
The government agreed to a plan that includes new federal funds because it was concerned that a failed deal could affect the financial markets.
The report says details are slated to be released Tuesday when BofA announces its fourth-quarter earnings.
A possible arrangement might protect BofA from some losses on Merrill's bad assets, the newspaper says.
A BofA spokesman had no comment on the Journal 's report.
So far, BofA has received $25 billion through the federal bailout of the nation's financial system. Under the Troubled Asset Relief Program (TARP) program, the Treasury Department is purchasing up to $250 billion in preferred stock in U.S. banks. The program was designed to stabilize the ailing financial system and to encourage banks to increase lending and stimulate the economy.
The bank received $15 billion in late October. Another $10 million was originally intended for Merrill. Because BofA acquired the securities firm Jan. 1, the Charlotte-based bank (NYSE:BAC) got the $10 billion. Treasury forwarded the funds through the Troubled Asset Relief Program on Jan 9.
Concerns have grown about BofA's financial position in recent weeks. The $2.7-trillion-asset bank has enormous exposure to consumer loans, which are deteriorating along with the economy. It also is juggling two merger integrations in Countrywide Financial Corp. and Merrill, eliminating 42,500 jobs across the company tied to those two deals.
This week Citigroup Inc. (NYSE:C) analyst Keith Horowitz said he expected BofA to post a $3.6 billion loss in the fourth quarter, and he also believes the company will cut its dividend again, to 5 cents from 32 cents. In the third quarter the bank cut its dividend by 50 percent.
In a research note last night, Standard & Poor's analyst Stuart Plesser said that even with additional government funding, BofA's capital levels will still be low relative to peers. Banks are required to maintain a certain amount of capital to protect against loan losses, and Plesser expects BofA will likely have to raise additional equity capital in the coming months and cut its dividend again. A capital raise via a common stock offering would dilute existing shareholders' equity further; in October the bank raised $10 billion in new capital through a common stock offering. Plesser continues to rate BofA's shares a "sell."
Christoper Mutascio, an analyst with Stifel Nicolaus, says he is reserving judgment on the latest capital infusion from the government. In a note this morning, Mutascio says while "the initial take on this is negative," the devil will be in the details and terms of the capital infusion. If the government assistance is "punitive, then it is a bailout of (BofA), which is not good. If it is advantageous then it would appear that (BofA) earned some ‘goodwill' from the federal government and any initial negative reaction would be premature." Mutascio rates the shares a "buy."
BofA reported net income of $1.17 billion in the third quarter, down from $3.7 billion a year earlier. Analysts polled by Thomson Financial expect the company to report fourth-quarter earnings of $1.2 billion, or 8 cents per share.
Danny Pleasant has been named director of the Charlotte Department of Transportation.
Pleasant became interim director after the retirement of Jim Humphrey in late 2007. He has worked in executive positions at the department for seven years.
The department is responsible for Charlotte's road planning and operations.
"Danny has proven to be an effective leader during his tenure as interim director, helping to position Charlotte as a national model for land-use and transportation choices," says City Manager Curt Walton. "His strategic planning and urban design expertise will help guide the city as we prepare for the future in terms of managing growth, sustaining a high quality of life and accommodating more residents."
Pleasant says he will focus on enhancing services to developers, streamlining the development-review processes, improving the speediness of project delivery and finding a balance between transportation and economic-development objectives.
N.C. General Assembly lawmakers have authorized the drafting of legislation that would cut the state's corporate income tax rate and make fundamental changes to the incentives the state uses to lure companies to North Carolina.
A 13-year-old system of tax credits - the William S. Lee program, which was revised into Article 3J in 2007 - essentially would be gutted. In its place, the state would pump more money into its largest cash-for-jobs grant program and shave the corporate income tax rate to 6.5 percent from 6.9 percent.
The bill will be offered by the Joint House/Senate Incentives Committee, which has been meeting over recent months to determine the efficacy of state incentives in corporate recruiting.
On Tuesday, committee members were briefed by consultants from the UNC Chapel Hill who were hired to study the performance of the state's incentives package since the early 2000s. The consultants concluded that the incentives failed to produce enough jobs.
"We've provided a lot of incentives over the past 10 years to firms that didn't grow much," says Brent Lane of UNC's Center for Competitive Economies.
In a sample of 1,213 companies, Lane found that firms receiving Lee credits added jobs at a faster clip than the overall rise in statewide employment between 1996 and early 2001. Over the ensuing five years, however, companies getting tax credits added jobs at, or more often below, the statewide rate.
Under the Lee and 3J programs, companies could claim tax credits on their state corporate or franchise tax bills for any of three reasons: adding jobs, investing in new machinery and spending funds on research and development.
Lane says the only credit program that consistently added jobs was the one for research and development. It is one of the few Lee/Article 3J incentives that Lane and his UNC colleagues recommend keeping as the state revamps its incentives arsenal.
One of the changes committee members will consider drafting into their bill would double the size of the state Jobs Development Industrial Grant, or JDIG, program, which pumps cash directly into firms for meeting hiring goals.
Between 2003 and 2007, the state spent about $380 million on JDIG awards. Lane says any expansion of the program should also include a provision calling for JDIG to target the state's poorest counties. To date, more than 80 percent of JDIG grants have gone to projects in North Carolina's wealthiest counties.
The corporate tax reduction would happen in phases. But moving in that direction, researchers say, would not only make the state more competitive in the region but also would benefit a greater number of North Carolina companies than the current mix of taxes and incentives does.
N.C. Sen. David Hoyle (D-Gaston) an incentives committee co-chair, gave the overall plan his endorsement.
"A bill that looks similar to that, I wouldn't be ashamed to put my name on something that looks like that," he says.
Other committee members pointed to the fact that 2009, with the promise of a budget shortfall approaching $2 billion, will be a difficult year to make any sort of significant tax changes.
Even so, the committee directed its staff to begin drafting legislation.
"And I think any decisions we make should be based on good research, not on what we might want to happen," says Rep. Jennifer Weiss (D-Wake), a committee co-chairwoman. Any bill the committee offers, she added, could be revised over what promises to be a long legislative session.
The United States posted its lowest rate of inflation in more than 50 years in 2008, mainly because of a record plunge in gasoline prices.
The U.S. Department of Labor says consumer prices dropped 0.7 percent in December, and rose just 0.1 percent for the year.
The small uptick last year was much lower than the 4.1 percent gain in 2007, and the smallest year-over-year change since 1954, when consumer prices fell 0.7 percent.
For December, gas prices fell 17.2 percent, the largest monthly decline in records that go back 71 years. Overall energy prices also dropped a record 8.3 percent as home heating oil and natural gas prices declined.
Energy prices fell 21.3 percent for 2008, with gas costs tumbling 43.1 percent. Food prices were flat in December, but were up 5.8 percent for the year.
December marked the third consecutive month consumer prices dropped. Excluding volatile food and energy prices, core inflation was unchanged in December. For the year, it was up a moderate 1.8 percent, compared with a 2.4 percent increase in 2007.
Price pressures have eased as the recession intensifies. According to the U.S. Federal Reserve, production at the nation's factories, mines and utilities plunged 2 percent in December, capping the worst year for manufacturers since 2001.
Industrial production declined 1.8 percent in 2008, a sharp reversal from the 1.7 percent increase logged in 2007 and the worst showing since a 3.4 percent decline during the 2001 recession.
MMG Update + By The Numbers - Tuesday, January 20, 2009 10:19AM ET
Current Trend Direction: Sideways
Risks favor: Floating
Current Price of FNMA 4.0% Bond: $100.06, -12bp
Today marks the inauguration of Barack Obama, America's 44th president. President-Elect Obama has an arduous task ahead of him as he takes control of a nation that is in the midst of one of the worst economic downturns since the Great Depression.
There are no economic reports due for release today - but that hasn't meant much lately as Mortgage Bonds have traded in volatile fashion without the spark of economic news...and today is no different. Prices have already improved significantly from their worst levels earlier today.
The markets are waking up and realizing the cost of these rescue plans and stimulus packages will be to sell more Treasury Bonds. This additional Bond supply has to be absorbed by the market and when there is more supply than meets demand - prices drop. Treasuries, in particular, are under very heavy selling pressure this morning.
This morning's price action is causing a test of support at the 25-day Moving Average. Take a peek at the Bond Chart and you can see that prices are off the worst levels of the day, after touching support at the Rising Trend Line and improving. We'll float for now, as prices test this support.
But let's be mindful - and hopefully you are experiencing this as well - that investors are slammed with the uptick in volume during the past several weeks. This comes at a time when investors have both shrunk in number and have depleted head count, in an effort to slash costs. So while the increase in activity is certainly a good thing, it may be too much too soon for investors to handle, and the only way to slow down the volume is by an increase in pricing. And if you're an investor...why not do this, while being maxed out in capacity anyways? It helps increase profits while making the workload manageable. As an originator, this can be very frustrating as you watch the actual markets improve from time to time...but this improvement is not being reflected in some investors rate sheets. Let's remember, this is a temporary phenomenon - but during the interim, this is not a time to cut short your lock-in time frames. In other words, make sure you have ample or even excess lock-in periods to get your loans closed during this bottleneck. Be smart and take 60 day locks, rather than trying to squeeze in a shorter time frame.
BY THE NUMBER$
1. THE BEST AND THE WORST - In the last half-century (i.e., the 50-years from 1959-2008), the largest percentage gain day for the S&P 500 (up +11.6% on 10/13/08) and the 2nd largest percentage loss day (a drop of 9.0% on 10/15/08) occurred within 2 days of each other. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).
2. GOOD DAYS AND BAD DAYS - In spite of losing 37.0% in calendar year 2008, the worst total return performance for the S&P 500 in 77 years, 5 of the top 6 percentage gain days in the last 50 years for the index occurred in the last 3 months of 2008. The S&P 500 also suffered through 4 of its 6 worst percentage loss days from the last 50 years in 2008 (source: BTN Research).
3. FEW STOCKS, LARGE IMPACT - The 10 largest stocks in the S&P 500 made up 23% of the total stock market capitalization of the index as of 12/31/08. Thus, 2% of the stocks in the index (i.e., 10 out of 500) have 23% of the stock value of the index. The S&P 500 is a market-cap weighted index (source: S&P).
4. BIG FOR A LONG TIME - 5 of the 10 largest capitalized stocks in the S&P 500 as of 12/31/08 were also ranked on the list of the 10 largest capitalized stocks for the index a decade earlier (source: S&P).
5. MISSING THE BEST DAYS - The average total return for the S&P 500 over the last 25 years (i.e., 1984-2008) is +9.8% per year. If you missed the 25 best percentage gains days in those 25 years (i.e., 25 days in total, not 25 days each year), your average total return falls to +3.9% per year (source: BTN Research).
6. TIME IS ON YOUR SIDE - The split between "up" and "down" days for the S&P 500 over the last 50 years is 53% "up" and 47% "down." The split is 58%/42% if the time period analyzed is months over the last 50 years, 63%/37% if the time period is quarters, 72%/28% if the time period is years, 76%/24% if the time period is 5 rolling years, and 88%/12% if the time period is 10 rolling years. The calculation was based upon the raw index value of the S&P 500 and thus would not include the impact of any reinvested dividends (source: BTN Research).
7. THE NEXT YEAR - In the last 75 years (i.e., 1934-2008), the S&P 500 stock index has suffered total return losses of at least 20% in 4 different calendar years, the most recent was last year's 37.0% decline. In the year after the 3 previous 20%+ tumbles, the index gained an average of +32% (source: BTN Research).
8. THREE OPTIONS - US businesses have an estimated $758 billion of corporate debt maturing this year. The bonds may be paid off, rolled over to new debt or could default (source: S&P, Wall Street Journal).
9. LIVE AND LET DIE - If it takes you 4 minutes to read this issue of BTN, in that length of time 30 births and 20 deaths will have taken place in the USA (source: Census Bureau).
10. OUT-OF-POCKET - Households pay 31% of total health care expenditures (e.g., prescription drugs, hospital care, physicians' costs, clinical services, nursing home care). The remaining 69% is paid by businesses, insurance companies and governments (federal, state and local). The data is from calendar year 2007 (source: Centers for Medicare & Medicaid Services).
11. NOT THE FIRST - One of President-elect Obama's campaign pledges is to implement universal health care, an effort first undertaken by President Theodore Roosevelt more than 100 years ago (source: Newsweek).
12. GLOOMY FORECAST - The chief economist for a global economic forecasting company with offices in 14 countries worldwide believes the # 1 risk today facing the US is a timid response to the global financial crisis. Nariman Behravesh predicts the current US recession may potentially be the most severe America will experience since the end of World War II (source: HIS Global Insight).
13. TAX WORK - IRS audits of individuals and businesses resulted in the payment of $1.1 billion of additional taxes per week in fiscal year 2008. 33 out of every 34 individual taxpayers making at least $200,000 were not audited by the government (source: Internal Revenue Service).
14. BY THE NUMBERS - The top 3 jobs in the USA are # 1, mathematician; # 2, actuary; and # 3, statistician. The rankings were based upon work environment, income potential, employment outlook, physical demands of the job and work-related stress. The worst job in the nation: lumberjack (source: CareerCast.com).
15. WORKING IN WASHINGTON - Barack Obama becomes the 44th President of the United States tomorrow. His new administration is responsible for 7,840 appointees to fill government jobs. 85% of those appointees do not require Senate confirmation (source: Rocky Mountain News).
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