Bankruptcy Blip Hits Bank of America
Despite reaching an earnings record for last year, Bank of America saw its fourth-quarter results clipped by a surge in bankruptcies.
Like other big banks, Bank of America said the implementation of new bankruptcy laws in mid-October caused a surge of filings by people trying to beat the deadline for the rule change.
Net income in the fourth quarter was $3.77 billion, or $0.93 per diluted share, down from $3.85 billion, or $0.94 per share a year earlier.
Kenneth Lewis, chairman and CEO of Bank of America, said that the impact of the change in bankruptcy laws and the company's practices for overdraft charge-offs and credit card fees reduced pretax earnings by $320 million in the fourth quarter.
"The bankruptcy issue will not recur and should actually benefit us going forward as we expect a reduced level of bankruptcy filings under the new law," he said in the company's earnings release.
For the full year, Bank of America said that higher mortgage banking profits, which were boosted by a reversal of the writedown in mortgage servicing rights that was taken in 2004, helped generate record profitability.
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