July 17, 2009 / 6:42 AM / 11 years ago

Bank of America, GE profits tumble

NEW YORK (Reuters) - A surge in credit losses reported by Bank of America (BAC.N) on Friday and a steep drop in General Electric’s (GE.N) revenue damped recovery hopes after promising earnings and data earlier in the week.

The Citi trading post sign is seen on the floor of the New York Stock Exchange, November 24, 2008. REUTERS/Shannon Stapleton

A report showing a jump in U.S. housing starts and permits in June and signals from Germany’s economy ministry that Europe’s largest economy may have come out of recession helped temper the gloom over U.S. earnings, however.

Bank of America, the largest U.S. bank, said second-quarter net income fell 25 percent to $2.42 billion (1.5 billion pounds) and warned results would continue to be hurt by troubled loans from credit card, mortgage and business customers due to the weak economy..

“Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010,” Chief Executive Kenneth Lewis said.

No. 3 U.S. bank Citibank reported a $4.3 billion quarterly profit, thanks to the merger of its brokerage arm into a new venture after struggling survive the financial crisis.

Stripping out the one-off gain, it suffered a loss, albeit smaller than analysts’ consensus forecast.

Citibank took a $45 billion bailout from the U.S. Treasury

last year as part of a $125 billion program to keep afloat top banks crippled by bad debts from the U.S. housing meltdown.

U.S. conglomerate GE’s profits fell by nearly half as revenues dropped 17 percent — well above expectations for a 10 percent drop — as the slump that has gripped its finance and media businesses also dragged on its heavy industrial units.

U.S. stock markets soured on the reports, trading lower after positive earnings earlier in the week and strong economic

data from Asia lifted hopes for a turnaround in the global economic recovery. .N

Goldman Sachs (GS.N) on Tuesday said quarterly earnings surged 33 percent while JPMorgan Chase (JPM.N) reported a 36 percent rise on Thursday.


U.S. housing starts rose 3.6 percent last month while permits, an indicator of builder confidence, climbed 8.7 percent, suggesting some stabilization for the battered housing sector.

“It lends credence to the case that we’re working our way through and that we’ve seen the worst,” said Jim Awad, managing director at Zephyr Management in New York.

Speculation of a buyer for struggling lender CIT Group (CIT.N) weighed on U.S. Treasuries. CIT, which provides financing to thousands of small and mid-sized businesses, could not be reached for comment. Earlier, the company said talks with the government for help had failed.

The euro zone exports plunged 24 percent year on year but imports fell by 27 percent, underlining the weakness of both domestic and external demand due to the economic downturn.

Nonetheless, Germany’s economy ministry said gross domestic product may have bottomed out in the second quarter after a record contraction in the first three months of this year.

“There is much to suggest that overall economic activity may have stabilized in the second quarter of this year,” the ministry said in its monthly report for July.

U.S. Treasury Secretary Timothy Geithner told French newspaper Le Monde he was more optimistic about the economic outlook than he was three months ago.

“I think that we are doing better than we could have imagined at the beginning of 2009,” he said.

Editing by Kenneth Barry

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