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Tuesday, January 22, 2008

BofA Conference Call

by Calculated Risk on 1/22/2008 10:33:00 AM

On CDOs:

“From a valuation and management standpoint, we've evolved towards a view that for many if not most of these structures will see terminations and therefore have looked through the securities to the net asset value support by the underlying securities. In these cases we utilized external pricing services consistent with our normal valuation processes. We priced over 70% of the exposure in this manner”
Via MarketWatch:
CFO Joe Price also told listeners on a conference call Tuesday morning that the company marked down its value for CDOs and subprime loans to less than half their original value. "The combined subprime CDO sales and trading positions at 12/31 are carried at 600 million or about 30 cents on the dollar," Price said.
Credit Cards:
“We have seen an increase in delinquency in our card portfolio in those states most affected by housing problems. So give you a little insight, the quarter-over-quarter rate of increase in 30-day plus delinquencies in the combined states of California , Florida , Arizona , and Nevada increased over five times the pace of the rest of the portfolio. That group makes up a little more than a quarter of our domestic consumer card book. We have mentioned before that we expect to be in the 5 to 5.5% range for overall consumer card losses for the full year of '08. That compares to the 4.75% we experienced in the fourth quarter”
Home Equity:
“Home equity reported an increase in net charge-offs of 179 million or 63 basis points, up from 20 basis points at the end of September. 30-day plus performing delinquencies are up 25 basis points to 1.26%. Nonperformers in home equity rose to 1.25% of the portfolio from 82 basis points in the prior quarter. Even though our averaged refreshed FICO score remains strong at 721 and the combined loan to value is at 70%, we have seen a rise in the percentage of loan that is have a CLTV above 90% driven by the more recent vintaging. 90% plus CLTV currently represents 21% of the loans versus 17% in the third quarter. We believe net charge-offs in home equity will continue to rise given seasoning in the portfolio and softness in the real estate values. We increased reserves for this portfolio to 84 basis points but wouldn't be surprise to do see losses cross the 100 basis point mark by the middle of this year as we work through higher CLTV vintages. And relative to the industry's performance, we believe that our results will continue to benefit from our relationship base direct-to-consumer strategy. Again, continued economic deterioration could drive losses higher. Our residential mortgage portfolio continues to say perform well with losses at only 4 basis points in the fourth quarter. While we've seen some deterioration in subsegments, namely our community reinvestment act portfolio under our low to moderate income programs to total some 8% of the book, nothing really stands out to us at this point”
On Countrywide (from MarketWatch): Bank of America sees Countrywide deal done in second half
Bank of America CEO Ken Lewis said Tuesday that the company expects to close its previously announced acquisition of mortgage giant Countrywide Financial in the second half of 2008.