Bank of America earnings fear spark global sell-off

The recent confidence in the world's stockmarkets was shattered yesterday when Bank of America revealed it had set aside $13.38bn (£9.2bn) for credit losses, an increase of 56 per cent over the previous quarter.

While America's bellweather bank did manage a net profit of $4.24bn, including an 'exceptional gain' of $1.9bn from selling its stake in China Construction Bank, the focus was firmly on the group's continuing credit difficulties.

Chairman and chief executive Ken Lewis admitted "credit is going to get worse before it will eventually stabilise and improve", but as to the timing of that improvement, he cautioned "I'm not going to hazard a guess". Shares in BoA were down 24 per cent at the close, dragging down Citigroup shares 19.5 per cent.

Fear swept through markets as a result of the uncertainty, with radio reports suggesting that 16 of the US's biggest banks were "technically insolvent", bringing a denial from the US Treasury. It said that the results of its 'stress tests' had not been yet finalised.

Bank shares in the UK and Asia also suffered, with Barclays closing down eight per cent and HSBC shares dropping six per cent in Hong Kong.

WHAT THEY ARE SAYING
James Quinn, Daily Telegraph: A number of shareholder groups are looking to oust Mr Lewis at the bank’s upcoming annual meeting, to be held on April 29, and these results are unlikely to do him any favours. Late last week, those calling for his exit were bolstered after two shareholder advisory groups backed the calls, while those two plus another group said that the role of chairman and chief executive should be split in two.

Lex, Financial Times: The name is the clue. For Bank of America's story is being written on US soil - by homeowners, small companies and commercial property hustlers. After all, no domestic bank has more deposits, while 6,000-odd branches stretch from sea to shining sea. Thus BofA was a big winner during the credit boom. Unfortunately, as Monday’s first-quarter results show, the bank now shares its countrymen’s suffering too.