Hammered again by weak economic conditions in the United States, Europe and Canada, Bank of America Corp.’s Global Card Services unit today reported a net loss of $1 billion for the fourth quarter ended Dec. 31; the unit reported a $9 million loss for the same period a year ago.
The card-unit loss was in line with the $1 billion loss BofA reported during the third quarter, Joe Price, the bank’s chief financial officer, noted today during a conference call with analysts. BofA has posted four consecutive quarters of $1 billion-plus losses for its card unit, primarily because of skyrocketing credit card charge-offs during the recession. But losses gradually are abating from the $1.87 billion loss BofA posted for the first quarter of 2009.
The credit card unit accounted for some 54% of BofA’s total consumer banking-related losses during the fourth quarter.
Credit card net losses dropped 10.9% during the quarter, to $4.9 billion compared with $5.5 billion the previous quarter ended Sept. 30, partially because of reductions in total outstanding card balances within the issuer’s portfolio, Price noted. “Now, obviously, one quarter doesn’t make a trend, but we feel much better about the loan losses this quarter and that they signal stabilization, if not an improvement trend,” he said.
Total revenue net of interest expense for the card unit during the fourth quarter fell 10%, to $7.2 billion from $8 billion during the same period in 2008. Credit card purchase volume during the quarter fell 3%, to $54.9 billion from $56.6 billion.
The provision for credit losses rose 17%, to $6.9 billion from $5.9 billion. The charge-off rate on managed net credit card receivables was 11.88%, up 472 basis points from 7.16% a year earlier. The charge-off rate on card loans at least 30 days past due was 7.19%, up 51 basis points from 6.68% during the fourth quarter last year.
During the fourth quarter, BofA reduced interest rates for more than 200,000 card customers to provide “more affordable” payment terms, the company said in a statement. BofA added some 994,000 new credit card accounts during the quarter, down 29% compared with 1.4 million new accounts added a year earlier.
Debit card purchase volume during the quarter rose 8.1%, to $57.2 billion from $52.9 billion a year ago.
During the conference call Price warned that the Credit Card Accountability, Responsibility and Disclosure Act passed last year will “manifest itself throughout the (coming) year” with new restrictions on certain fees and interest rates that likely will dampen card-related income. Many of the act’s provisions take effect next month.
“We felt a little of this in the fourth quarter, but it will ramp up in 2010,” Price said.
