Bank of America Earnings Drop Less than Expected

Bank of America reported earnings that were less worse than expected and predicted that Countrywide will add to earnings next quarter. As Bloomberg reported:

The bank said Countrywide will add to profit this year, and that cost savings will be ``significantly'' more than the $670 million projected in January. Countrywide lost $2.3 billion in the second quarter because of almost $4 billion in loan losses; those results weren't part of the bank's earnings, since the purchase wasn't completed until the start of the third quarter. When Bank of America announced the transaction in January, it said Countrywide's impact on earnings would be ``neutral.''

``That's very good news,'' said Mary Jane Matts, a portfolio manager at Fifth Third Asset Management in Cleveland with about $22 billion in assets under management, including Bank of America shares. ``If there was a cascading here of additional bad news for Countrywide, I think you'd see the stock moving the other way and about the same magnitude.''

Analysts may reduce their estimates on how much Bank of America needs to raise in new capital because of the new earnings report, KBW Inc. analyst Jefferson Harralson said in a Bloomberg TV interview today. Last week he said the bank would need an additional $10 billion this year.

A week and a half ago, at the bottom of the market I wrote that Bank of America might be a good opportunity. So far, so good.