Bank of America Corp. said it swung to a first-quarter loss as
the banking giant was weighed down by $6 billion in legal charges
and was also hit by slumping mortgage originations.
Shares sank 0.9% in recent premarket trading.
Charlotte-based Bank of America reported a loss of $276 million
compared with a profit of $1.48 billion a year earlier.
The latest quarter's results include a previously disclosed
charge of 21 cents a share tied to a settlement over mortgage
securities sold to Fannie Mae and Freddie Mac. Results also include
an additional 19 cents in charges related to what the bank said
were previously disclosed legacy mortgage-related matters.
On a per-share basis, Bank of America reported a first-quarter
loss of five cents versus a profit of 10 cents a year earlier.
Stripping out one-time charges besides those tied to the mortgage
securities settlement, Bank of America reported per-share earnings
of 14 cents, which is higher than the five cents a share including
the settlement that was expected by analysts polled by Thomson
Reuters.
Revenue was down 2.7% to $22.57 billion, compared with analysts'
expectation of $22.33 billion.
For the first quarter, Bank of America's litigation expense was
$6 billion compared with $2.2 billion a year earlier and $2.3
billion in the fourth quarter. Although Bank of America's
settlement with the Federal Housing Finance Agency eliminates a
major hurdle, analysts at Credit Suisse recently noted that the
lender could still face between $3 billion and $5 billion in fines
or penalties tied to investigations from the Justice Department,
State Attorney Generals and others.
Earlier this month the bank agreed to pay at least $772 million
to settle allegations it misled customers when marketing
credit-card products promising to protect consumers against
identity theft and job loss.
The results come as the lender has been working to eliminate the
distraction of crisis-era issues, and focus its efforts on reining
in costs and improving efficiency. Bank of America showed progress
in these efforts last year, reporting revenue increases in all five
of its major business units.
In the first quarter, Bank of America showed it remains heavily
exposed to the rise in interest rates that has buffeted the
mortgage business across the U.S. Mortgage originations declined
65% from a year earlier, which Bank of America said reflected a
drop in market demand for refinance mortgages.
Wednesday's bottom line contrasts with the last quarter of 2013,
when Bank of America, led by Chief Executive Brian Moynihan, posted
sharply higher net income and its highest annual profit since 2007.
The latest quarter shows that Bank of America's rebound is still
marked by bumps along the way.
"The cost of resolving more of our mortgage issues hurt our
earnings this quarter," said Mr. Moynihan in prepared remarks.
Analysts at KBW recently noted that "the key focal point of Bank
of America's earnings is still likely to be on the continued
progress in lowering its expense base." For the first quarter, Bank
of America's noninterest expense was up 14% from a year earlier and
28% from the prior quarter to $22.34 billion.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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