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Deals lift earnings of BofA, Wachovia

Acquisitions help the banks exceed analyst expectations in the fourth quarter.

January 24, 2007|From the Associated Press

CHARLOTTE, N.C. — Fourth-quarter earnings rose strongly at Bank of America Corp. and Wachovia Corp., driven by acquisitions last year that helped the Charlotte-based banks avoid the interest rate squeeze that has hampered some of the nation's other leading banks.

Bank of America, the nation's No. 2 bank, said Tuesday that fourth-quarter net income jumped 47%, aided by its takeover of credit card issuer MBNA Corp. Wachovia, the No. 4 bank, said its 35% gain in fourth-quarter earnings was driven by its purchase of Golden West Financial Corp., which was completed in October.

Bank of America's profit climbed to $5.26 billion, or $1.16 a share, from $3.57 billion, or 88 cents, a year earlier. Results for the fourth quarter of 2005 did not include MBNA, which was acquired Jan. 1, 2006. The bank's revenue grew 34% to $18.46 billion.

Excluding merger and restructuring charges, the company earned $5.01 billion, or $1.19 a share, in the latest quarter.

That exceeded the profit of $1.18 a share on revenue of $18.01 billion expected by analysts surveyed by Thomson Financial.

Michael L. Mayo, an analyst with Prudential Equity Group, said in a research note that he was concerned that Bank of America's fourth-quarter performance was below that of other money center banks, such as JPMorgan Chase & Co.

He said that spread revenue -- the difference between what the bank pays for funds and what it can lend them out at -- was up only modestly. Meanwhile, "its institutional securities business lagged peers" and capital markets revenue was not as strong as at other major banks, Mayo said.

Bank of America shares fell 33 cents to $53.32.

Earnings at Wachovia rose to $2.3 billion, or $1.20 a share, in the fourth quarter from $1.71 billion, or $1.09, a year earlier. Revenue rose 31% to $8.59 billion.

Excluding merger and restructuring expenses, adjusted net income totaled $2.33 billion, or $1.21 a share, versus $1.74 billion, or $1.11 cents a share, a year earlier. That topped the $1.18 a share in earnings on revenue of $7.81 billion expected by analysts surveyed by Thomson Financial.

Wachovia shares climbed 38 cents to $56.65.

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