CHARLOTTE, N.C. — Bank of America Corp. said Friday it lost more than $2.2 billion in the third quarter as loan losses kept rising, providing more evidence that consumers are still struggling to pay their bills.
The nation's second-largest bank said it wrote down loans on its books by almost $10 billion during the July-September period, almost a $1 billion increase from the second quarter. The bank also added $2.1 billion to its reserves to cover bad loans, bringing its provision for credit losses to $11.7 billion. The bank's total allowance for loan and lease losses now totals $35.83 billion.
Bank of America's results were aided by profit from its wealth management business, which includes the bank's Merrill Lynch division. While the Jan. 1 acquisition of Merrill Lynch has brought widespread criticism and legal problems for Bank of America, the deal was paying off during the third quarter, when Merrill Lynch's revenue and profit more than doubled from a year ago.
The bank's earnings follow the pattern set earlier this week by Citigroup and JPMorgan Chase, which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments.
Together, the reports depict a financial industry that is still deeply troubled, although the trading operations at companies like Bank of America, JPMorgan and Goldman Sachs Group mitigated some of the bad news.
Banks have predicted for some time that their loan losses would keep rising. And Bank of America CEO Ken Lewis, joining his counterparts at JPMorgan and Chase, confirmed that this trend will continue into the near future as unemployment rises and consumers keep struggling.
"Based on (the) economic scenario, results in the fourth quarter are expected to continue to be challenging as we close the year," Lewis said in a conference call with analysts.
Bank of America said it lost $2.24 billion, or 26 cents per share, after accounting for the preferred dividends of $1.24 billion. That compared with a profit of $704 million, or 15 cents per share, a year earlier. Revenue in the quarter increased 33 percent to $26.04 billion.
Bank of America is considered particularly vulnerable to unemployment, which climbed last month to 9.8 percent in the United States. Economists predict the jobless rate will pass 10 percent in the coming months.
The bank's massive portfolio of credit card loans could help investors determine where the economy is headed, said Doug Dannemiller, senior analyst at Boston-based research firm Aite Group.
"As unemployment rates are in the 10 percent range, the results on consumer lending aren't going to improve until that number gets lower," he said.