Bad loans hand Bank of America a $2.23 billion loss

Bank of America, the largest U.S. bank by assets, reported a net loss of $1 billion for the third quarter, failing to match high market expectations after banner earnings reports from rivals JP Morgan Chase and Goldman Sachs.

When accounting for dividends on preferred shares, including $893 million related to dividends paid to the U.S. government, the loss shot up to $2.24 billion.

"Credit costs remain high, and that is our major financial challenge going forward," said CEO Kenneth Lewis. This is the last quarterly earnings report that will be overseen by Lewis, who will retire by year-end, in the wake of lawsuits and federal and state investigations over the circumstances surrounding the bank's acquisition of broker Merrill Lynch last year. Lewis has agreed to give up his 2009 salary and bonus.

Bank of America, the largest U.S. bank by assets, reported a net loss of $1 billion for the third quarter, failing to match high market expectations after banner earnings reports from rivals JP Morgan Chase and Goldman Sachs.

When accounting for dividends on preferred shares, including $893 million related to dividends paid to the U.S. government, the loss shot up to $2.24 billion.

"Credit costs remain high, and that is our major financial challenge going forward," said CEO Kenneth Lewis. This is the last quarterly earnings report that will be overseen by Lewis, who will retire by year-end, in the wake of lawsuits and federal and state investigations over the circumstances surrounding the bank's acquisition of broker Merrill Lynch last year. Lewis has agreed to give up his 2009 salary and bonus.

Bank of America's results were helped by profit from Merrill Lynch, including income from bond, stock and currency trading.

The bank hasn't announced a successor for Lewis yet or when such an announcement might come. In a conference call with analysts after the earnings release, Lewis said, "(The board) is striking a balance between getting it right and doing it with a sense of urgency, but I can't give you a date."

Bank of America stock (BAC) traded lower Friday. It also helped drag down the broader market.

As the largest lender to consumers, Bank of America, based in Charlotte, was badly hurt by increasing unemployment, which rose to 9.8% in September. Losses grew in all its consumer-related businesses. [Read More]