Economy takes toll on lenders as well as consumer credit scores

10.16.09
By Nicholas Storie

The economy is taking a toll on much more than consumers' credit scores. Some of the nation's top lenders are also feeling the pain as well.

This week, a leading credit card company, Bank of America, reported that it had lost $1 billion in the third quarter, due largely to $2.6 billion in credit related writedowns. Still, the company noted that it had also extended $183.7 billion in the third quarter, indicating that it is still positioning itself for the post-credit crunch era.

The company's net income was still higher for the first nine months of this year than for the comparable period in 2008, and it also added $2.1 billion to its reserve for credit losses.

"Obviously, credit costs remain high, and that is our major financial challenge going forward. However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card customers," said CEO Ken Lewis in the earnings announcement.

On the real estate front, the company noted that it had also financed $95.7 billion in first mortgages, which have also benefited substantially under the popular $8,000 federal tax credit. Another 215,000 customers were said to have benefited from revised mortgage terms to help them avoid foreclosure.

Separately, JP Morgan Chase CEO Jamie Dimon reported that his company's $3.6 billion quarterly income "reflected the strong earnings power of the company" but he also cited the high cost of credit. JP Morgan Chase announced that it had added $2 billion to its own consumer credit reserves while also revising some of its policies on overdraft fees and by revising terms for some troubled mortgages.

Consumers are still having considerable trouble maintaining their credit scores and debts in the current climate, but the situation also continues to take a significant toll on lenders.

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Credit debts are taking a toll on consumers as well as corporations.