Bank of America (BoA) made a $2.2 billion net loss for 2009 after counting the cost of repaying a $45 billion bailout to the US Government.
America’s biggest bank made a $5.1 billion loss in the final three months of last year, up from a $2.3 billion loss at the end of 2008 when the bank was struggling to buy Merrill Lynch.
BoA’s final quarter loss came on top of a $2.2 billion deficit in the third quarter of 2009, due to rising souring mortgage and credit card loans. The full year’s loss compares with a $2.5 billion annual net profit in 2008.
The bank would have made a $6.3 billion net profit had it not been for the $4 billion cost of repaying the Troubled Asset Relief Program (Tarp) bailout. The results were also weighed down by $4.5 billion worth of preferred stock dividends that the bank paid to the US Government before it had repaid its Tarp loan.
Revenue net of interest expense was up 63 per cent to almost $121 billion, partly due to recent acquisitions of Merrill Lynch, the investment bank, and Countrywide, the retail lender.
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But the bank was forced to more than double its provision for credit losses to $48.6 billion in 2009 as consumer loans, some of which had gone onto BoA’s books through its acquisitions, turned bad.
Bryan Moynihan, who became BoA’s chief executive on January 1, admitted that the loss was disappointing but said that there were some achievements in 2009 worth celebrating. “We repaid the American taxpayer, with interest, for the Tarp investment. Second, we have taken steps to strengthen our balance sheet through successful securities offerings,” he said. “And third, all of our non-credit businesses recorded positive contributions to our results.”
Mr Moynihan took over from Ken Lewis, BoA’s longtime chief executive who brought forward his retirement after criticism of his stewardship of the bank through the financial crisis. The bank set aside $31.5 billion to pay staff, up from $18.3 billion in 2008 as acquisitions increased the number of workers.
Morgan Stanley announced its second annual net loss of $907 million applicable to common shareholders last year, up from a $731 million loss in 2008.
But the bank made a $376 million profit in the fourth quarter, its second consecutive quarter in the black after three straight losing quarters. Morgan Stanley revealed a $14.4 billion compensation pool, up from $11 billion in 2008, to be shared between 61,388 employees. Due to a 36 per cent increase in the number of workers, average pay was down by about $9,000 to $235,192.
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Most of the new workers joined Morgan Stanley when it took control of Morgan Stanley Smith Barney, the world’s biggest broker network, created by last year’s merger with Citigroup’s Smith Barney, mid-year. Net revenue was up 28 per cent to $23.3 billion.
The institutional securities division, which includes investment banking, made a $1.2 billion net profit, up from a $658 million loss in 2008. Revenues in investment banking were up 29 per cent to $5 billion for the full year, including a 160 per cent increase in fourth-quarter revenues to $1.6 billion.
Morgan Stanley was the top adviser in Thomson Reuters ranking of global completed mergers and acquisitions for 2009. James Gorman, who became chief executive of Morgan Stanley on January 1, replacing John Mack, described the annual figures as “substantially improved” on 2008.