Bank of America profits plunge

Weaknesses in the economy and market disruptions are said to be the reasons.

    Kenneth Lewis said despite revenue growth, expectations were not met [GALLO/GETTY]

    Last week, Citigroup said it would cut 9,000 jobs after it announced losses of $5.1bn for the first quarter of 2008.

    US markets have faced periodic bouts of chaos in the fallout from the sub-prime mortgage crisis, which has cost banks tens of billions of dollars, and left the US economy on the brink of a recession.

    "The weakness in the economy and prolonged disruptions in the capital markets took their toll on our performance," Lewis said.

    'Gloomy future'

    Trading-related losses amounting to $1.31bn took a big bite out of the bank's earnings while it said it had increased its reserves to cover possible credit problems to $6.01bn.

    Shares in Bank of America, which ended the quarter with 6,148 US branches and $1.74 trillion of assets, were down 45 cents, or 1.2 per cent, to $38.11 in early trading on Monday.

    Lewis said he remained gloomy about the immediate future of the US economy as it continues to be affected by the housing slump, a related squeeze on credit and a rising number of job cuts.

    US banks were hit hard after offering high interest mortgages to borrowers who were later unable to repay.
     
    The crisis has also affected international lenders, who bought into or offered sub-prime loans in the US and then contributed to bouts of chaos on international financial markets.
     
    Banks in the US have foreclosed on home loans to thousands of people during the crisis.

    SOURCE: Agencies


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