Bank of America Sort of Beats, Thanks to a $1.9 Billion Pre-Tax Gain on the Sale of Shares of China Construction Bank
BofA earned $4.25 billion in Q1-2009, 44 c a share vs 5 c expected, BUT…
“(1) First quarter 2009 includes a $1.9 billion pre-tax gain on the sale of shares of China Construction Bank”
Page 29 ( good eyesight required )
Supplemental First Quarter 2009 Financial Information
…and $2.2 billion of gains were tied to some Merrill structured notes because credit spreads widened.
Not surprisingly, BAC is down 7% in PMT
Related:
April 21st, 2009 at 1:12 am
Morgan Stanley is booking a loss because their debt INCREASED in market value.
All the M2M bigots need to get used to what it really means. Which is all items on the balance sheet. Which means you get stupid results frequently.
If all companies marked their debt to market, they would have shown record profits like BAC.
If people really thought, they would realize that M2M is great for trading outfits, derivative books, etc. And not much else in the real world or real world businesses. Mostly because most values aren’t part of deep, liquid markets. Like intellectual property, for example. Or brands.
And companies do buy back debt at a discount, although not frequently enough. All disclosure rules regarding that should be suspended.
People want mirror accounting except when they don’t.
For the financially literate, the minimum value of a common stock is $0. Therefore, a “realistic” market value would book debt at prices to keep the book value positive. However, I prefer Luddite based GAAP myself. Going concern and all.