Bank of America posted terrible quarterly results this morning, managing to achieve even worse results than most analysts had expected.
Perhaps even more distressing than the actual results is the vagueness about what caused the losses. Lots of blather about “dislocations.” We should probably be grateful they didn’t actually say that the markets were “misbehaving” or mention a “28 sigma event.” Still when talking about this stuff Bank of America sounds like a quant fund manager in mid-August begging investors not to send in redemption notices.
The bank says it took a $607 million loss in trading revenue “due principally to the breakdowns in traditional pricing relationships, which made hedges ineffective, and the widening of credit spreads.” Which we take to mean that they were massively short volatility. You can call that a hedge, we guess. But keep in mind that when you ask a whore in Beijing what her name is, she almost always replies, “I make a name for you. What you want to call me?”
The results also imply that financial engineering may have passed the point of human comprehension. Does anyone understand how to trade CDOs? If so, they don’t work at Bank of America, which took a $527 million hit.
Just about the only bright(ish) spots on the earnings report was that Bank of America didn’t take too large a hit from losses in buyout loans. And, of course, they aren’t run by Chuck Prince. (As a side note, however, if B of A takes a large hit from the earnings report, which is might not since already people are saying trading revenues are unpredictable and might go up next quarter, it could lose it’s place just ahead of Citigroup in the race for who has the bigger market cap.)
And, hey, who knows. Maybe The Entity will make everything okay.

Bank of America Third Quarter Earnings Per Share Decline 31% to 82 Cents
[PR Newswire]

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Comments (7)

  1. Posted by ryan o'reilley | October 18, 2007 at 9:54 AM

    I’m calling shenanigans on BofA. The website has been down all morning, unable to access the press release or the slides.

  2. Posted by Anonymous | October 18, 2007 at 10:05 AM

    Carney, a 9:31am post way to get the ball rolling early. Someone popped their little blue guys this morning.
    No, not viagra, pervs.

  3. Posted by Anonymous | October 18, 2007 at 10:10 AM

    Perhaps BofA should hire more level 3 accts. from GS.

  4. Posted by Anonymous | October 18, 2007 at 10:17 AM

    Anyone seeing the headlines coming across bloomberg from the call? Not pretty.

  5. Posted by s75 | October 18, 2007 at 10:41 AM

    The bloomberg headlines are not so bad. Unless you live in a cave you know by now that NCOs in home eq are going higher.
    Carney, Beijing I thought you were in shreveport …

  6. Posted by thimbu | October 18, 2007 at 11:10 AM

    LOl.. why not hire those level 3 bean counters..this getting comical and tragic for the taxpayers and shareholders.

  7. Posted by thimbu | October 18, 2007 at 11:11 AM

    LOl.. why not hire those level 3 bean counters..this getting comical and tragic for the taxpayers and shareholders.