Wednesday, January 18, 2012

What earnings reports so far could mean for Bank of America

A number of major banks, most notably JPMorgan Chase, Citigroup and Wells Fargo, have reported their fourth quarter and year-end earnings ahead of Bank of America's scheduled report Thursday.

Their results are a mixed bag for the Charlotte-based bank. Here's a look at three areas analysts are talking about.

Investment banking and trading. JPMorgan's investment bank took a hit year-over-year, both in investment banking fees and principal transactions en route to missing expectations. Citigroup, too, didn't fare well as capital market activity was weak. This could be a bad sign for Bank of America, whose investment bank can be a major profit driver.

Loan growth. Most banks posted some loan growth in the quarter, which clearly is a good sign for Bank of America. But Wells Fargo's loan growth from existing operations was a smaller part of its overall total, driven by an accounting gain and the purchase of several loan portfolios from troubled European banks. Bank of America is not in the position to buy growth, but could be in position to see organic loan growth like its peers.

Rep and warranty. This has been cited by analysts as a prime worry for Bank of America. Mortgage repurchase losses increased at JPMorgan Chase, and very slightly at Wells Fargo. Still, JPMorgan's losses were less than analysts at Keefe, Bruyette and Woods had predicted, leading them to reconsider their very dour initial outlook.