Biggest banks grow as rivals swallowed up

Bank of America, the top US bank by assets, reported a wider-than-expected loss, hurt by high loan losses and repayment of a US government bailout.

But the Charlotte, North Carolina-based bank said its credit problems were beginning to stabilise.

Its fourth-quarter provision for credit losses was $10.1bn (6.2bn), down 14 per cent from the third quarter.

"I would describe the outlook statement as cautiously optimistic," said Neil Smith, an analyst at WestLB.

"It could have been worse. They key phrase is, 'We have seen stabilisation of our credit costs.' That's got to be good for the consumer business."

The fourth-quarter results for the three banks underscore how the biggest banks are getting bigger, and profiting from it along the way.

The winners and losers in the next credit cycle may be determined in large part by which banks are gaining assets now.

"I think we are approaching some sort of normality here," said Mal Polley, chief investment officer, Stewart Capital Advisors. "I think charge-offs will still be high, but it's definitely stabilised."

Bank of America posted a quarterly loss of $5.2bn, or 60 cents per share, compared with a year-earlier loss of $2.4bn, or 48 cents a share.

Analysts' average forecast was a loss of 52 cents per share, according to Thomson Reuters.

But the bank received a boost from its controversial Merrill Lynch acquisition, which helped cost Ken Lewis his job as chief executive amid the uproar over the decision to proceed with the deal despite mounting trading losses at the investment bank.

Net income in Bank of America's global markets unit was $1.2bn, compared with a net loss of $3.7bn a year earlier.

The bank cited a more favourable trading environment and the addition of Merrill. The Merrill acquisition also bolstered the global wealth and investment management unit, where net income soared to $1.3bn.

Acquisitions also helped at Wells Fargo, the fourth-largest US bank.

It reported a profit of $2.82bn, or eight cents a share. Analysts on average expected a loss of one cent a share, according to Thomson Reuters.

Wells Fargo bought Wachovia Corp at the end of 2008, almost doubling the company's size and giving it a nationwide footprint.

Its chief financial officer Howard Atkins said losses from Wachovia are "tracking better than originally estimated at the time of the merger."