Bank of America surprised investors and observers today, posting a $4.2 billion quartlery profit. That makes BofA the third major financial institution–along with Goldman Sachs and JP Morgan–to beat expectations in the first quarter.
From the NY Times:
The bank said its profit rose to $4.2 billion in the first quarter, from $1.2 billion a year earlier, as it posted revenue of $36 billion. It also reported diluted earnings per share of 44 cents, compared with analysts expectations of about 4 cents a share. It added $6.4 billion to its loan-loss reserves.
“The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment,” Kenneth D. Lewis, the bank’s chairman and chief executive said in a statement. “It shows the power of our diversified business model as well as the ability of our associates to execute.”
“However, we understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment,” Mr. Lewis said.
Lewis still faces uncertain shareholders, who are upset at what they see as a lack of transparency in the company’s December acquisition of Merill Lynch.
Meanwhile, The Hill’s Ian Swanson reports that more financial institutions, posting big profits, are eager to get out of the TARP program ASAP:
Obama’s comments come as the administration comes under pressure from Goldman Sachs and J.P. Morgan, which want to be released from the Troubled Asset Relief Program. After posting better-than-expected results for the first quarter, those banks want to remove the stigma of government assistance, and remove themselves from rules that limit compensation to their executives.
Obama’s administration is seen as reluctant to allow even strong banks to unload their government money, chiefly because of the possibility that the economy could worsen and banks might find themselves undercapitalized after paying back TARP loans. The White House would prefer that even strong banks hang on to the government money for now, according to one former Federal Reserve official.
Questions: will BofA join Goldman and JP Morgan in a bid to withdraw from TARP? And if the administration says no, what’s the political fallout? The left is already criticizing Geithner and Summers for being too close to Wall Street. What happens when Wall Street says the administration is too controlling?