Bank of America Corp., the largest U.S. consumer bank, lost money in its credit-card unit for the first time since its January 2006 purchase of MBNA Corp. as more borrowers missed payments amid the slowing economy.
Card services, which include unsecured loans, lost $373 million in the third quarter, compared with a profit of $1.04 billion in the same period last year, the Charlotte, N.C.-based company said Tuesday in a regulatory filing. Defaults on cards, consumer loans and home mortgages contributed to a 47 percent decline in operating profit at the consumer and small-business division.
Bank of America provided more details on its third-quarter results Tuesday, two weeks after reporting a 68 percent decline in profit. Those earnings, released early as the bank announced plans to raise $10 billion by selling common shares, were worse than expected. The world’s biggest financial companies have disclosed $661 billion in losses and raised $634 billion in fresh capital.
“Credit cards have typically been among the most profitable parts of Bank of America’s business,” said Jim Campen, executive director of Americans for Fairness in Lending, a Boston-based nonprofit that studies the credit-card industry. “As we enter the biggest financial crisis since the Great Depression, more people aren’t going to be able to pay their credit cards.”
The consumer division, which contributed 55 percent of the bank’s profit in the first nine months of this year, earned $1.2 billion in the quarter ended Sept. 30, compared with $2.3 billion a year earlier.
