Bank of America trims leveraged loan exposure by 32% in second quarter

By Jennifer Lanning Drey

Portland, Ore., July 17 - Bank of America Corp. reduced its leveraged loan exposure by 32% during the second quarter and ended the period with funded commitments carried at $3.0 billion and pre-market disruption exposure carried at $2.8 billion, the bank reported Friday.

Bank of America posted second-quarter net income of $3.2 billion, compared to net income of $3.4 billion in the year-ago period, but believes achieving profitability will be tougher in the second half of the year, Kenneth D. Lewis, chief executive officer of Bank of America, said Friday during its second-quarter earnings conference call.

Positive drivers in the second quarter included a favorable capital markets environment that helped generate a 56% sequential increase in investment banking fees and trading results that exceeded first-quarter results, Lewis said.

However, the positive factors were offset by a continued high level of provision expense, negative valuation adjustments on liabilities including Merrill Lynch structured notes and the impact of a special FDIC assessment, he said.

Going forward, the bank expects to see continued weakness in the economy with unemployment peaking at about 10%, individual bankruptcy filings rising and home prices continuing to fall, Lewis said.

"I think we just have to get through the next couple of quarters and into 2010 before it becomes apparent that the market strength of our various businesses will help us return to more normalized earnings," he said.

In global banking, which includes Bank of America's commercial, corporate and investment banks, the provision for credit losses increased to $2.6 billion, driven by loan loss reserve increases and higher losses within the commercial domestic portfolio, which the bank said were across a broad range of borrowers and industries.

Bank of America is a bank holding company based in Charlotte, N.C.

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