"We'll continue to make deals in the context of whether there's a greater appetite for commercial real estate loans in the broader markets," Bob Stickler, senior vice president for corporate affairs for Bank of America, tells Globest.com. "That would impact us more than the merger."
Bank of America's loan portfolio is only about 7% of its loans, he points out, but even that is a huge figure compared to its total loans of $380 billion.
Bank of America, while it is the third largest U. S. bank holding company, is the biggest lender in what might be called middle business markets--$10 million to $500 million companies.
Bank of America, however, in common with other institutions, sells off many of its commercial real estate loans.
"Commercial real estate lending in the past has been a fairly volatile business, and we're trying to reduce that volatility," Stickler tells GlobeSt.com.
Bank of America recently reduced its prime-lending rate to 7.5% from 8%. Earlier this month, the bank posted a 17% drop in quarterly profits traced to bad loans and losses on investments.
The Charlotte-based bank earned $1.87 billion, or $1.15 a share. Earnings were above the $1.39 billion, or 85 cents per share reported in fourth quarter 2000, but below the record $2.24 billion, or $1.33 a share earned a year ago. The return on common equity was 15.9%.
The decline in earnings from a year ago was more than accounted for by a $415 million increase in the provision for credit losses and a $416 million decline in equity investment gains. Without these two factors, earnings were up about 7% from last year's record results.
The bank reported that commercial banking results declined last year due to higher provision expenses.
In another area, global corporate and investment banking, the bank earned $604 million last year, down from $724 million a year ago, attributed to a significant increase in provision expenses from $27 to $245 million.
Unless a counter offer comes up, the offer from First Union to buy Wachovia Corp. for about $13 billion should be officially complete by August, though observers say it will take longer to determine how the two institutions merge their operations and blend their divergent corporate cultures.
Wachovia is known for being more conservative, while First Union often has a more aggressive attitude towards growth. The deal will create the nation's sixth largest bank, based in Charlotte.
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David Wilkening
David Wilkening began his long journalism career as a police reporter for Chicago-area newspapers. He became a writer-editor for major newspapers in Chicago, Washington, Detroit and Florida. He has been a business editor, political editor and travel editor for newspapers and magazines. He tried for a while to be a political operative but did better as an adjunct college professor teaching English and journalism. He is the author of several books, both ghost-written and under his own name. He is also a widely published freelance writer who currently lives in Orlando.
