Bank of America Takes Huge Write-down
November 16, 2007
The second largest bank in America is Bank of America (BofA). The huge financial institution announced recently that it would have to take a massive three billion dollar write-down during the fourth quarter of this year (2007). As if that were not enough it also announced that its losses may increase as the housing market continues to wane.
Joe Price, chief financial officer for BofA, announced during a New York investor meeting that the institution is also putting money aside for any further potential losses but said he considers the losses to be manageable.
This type of news is not unique these days. Many of the nation’s largest financial institutions have had to take write downs in the last few weeks or months. Recently, the Wachovia Corporation had to mark down some one billion dollars of value in its loan-based securities portfolio.
During the third quarter of this year, some forty million dollars has had to be written down because of mortgage related issues. The fourth quarter does seem to hold any promise of improvement and may, in fact, be worse.
The well-known Morgan Stanley institution is anticipating a write-down of as much as six billion dollars during the fourth quarter.
Bank of America does not offer direct sub-prime loans, but as defaults in these types of loans are increasing, the overall value of the bank’s position is falling.
“There is complexity and difficulty in estimating the value of these positions,” Price said. “I might note that while we have classified these as principally supported by underlying sub-prime exposure, they do contain other asset classes in the collateral mix.