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Credit Card Applications » News » Other » BOA makes money despite losses

BOA makes money despite losses

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BOA makes money despite losses

The credit card division of the Bank of America has shown profits in the fourth quarter despite its overall loss. This profit is caused by consumer’s overall spending throughout 2010 and a decline on payment defaults. These results however, don’t show a realistic value as the Bank of America recently reported a fourth-quarter loss of $1.24 billion.This was as a result of the boosts in provisions that were tiered with litigations, and faulty loans, which impacted the value of the mortgage sector. For the year 2010, the bank posted an overall net loss of $2.24 billion; this was fueled by write offs, as the revenue had declined to $111.4 billion, a 7.9% drop.

Global Card Services also showed in their fourth-quarter a profit of $1.5 billion, however, had it not been for the $10.4 billion charge back during the third quarter, this fourth quarter would have shown a positive trend for their entire fiscal.

This write down, which is referred to as the goodwill impairment charge, was the outcome of the loss of future revenues, that was acknowledged by the bank; these further losses was attributed by the new restrictions imposed by the Federal laws with limits on fees charged.Not having these new rules, the potential earnings would have been over $3.8 billion, but as a result of this fee restructuring, the card company had a loss of $6.6 billion.

The current improvement in performance is being driven by the reduction in interest, as well as the lower costs in using credit.It may also be noted however, that since 2009, customers has kept their balances low, and as a result, the creditors revenue had decreased by $3.4 billion; this decline, factored with the fee restructuring, the bank lost the income it would have earned.

As the number of reported delinquencies and bankruptcies fell, credit card services might now reduce a $16.9 billion provision it had made in 2010 for incrementing losses.

Since the acquisition of Countrywide Financial Corp in 2008, the bank has been saddled with lawsuits, as well as having to repurchase previous bad loans.Earlier this month, the bank stated that it had agreed to Freddie Mac and Fannie Mae $2.8 billion in settlement that would trigger a $3 billion fourth-quarter provision.

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