BofA's net profit drops on rising costs and flawed home loans
Source: Bloomberg News |
January 18, 2013, Friday
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BANK of America Corp reported profit dropped 63 percent as costs mounted from faulty foreclosures and flawed home loans made as long as a decade ago.
Net income fell in the fourth quarter to US$732 million, or 3 cents a diluted share, from US$1.99 billion, or 15 cents, a year earlier, according to a statement yesterday from the North Carolina-based company. Adjusted for one-time items, profit was 29 cents a share, beating the 20-cent estimate of 18 analysts surveyed by Bloomberg News. Revenue shed 25 percent.
Chief Executive Officer Brian T. Moynihan has spent his first three years cleaning up after his predecessor's takeover of Countrywide Financial Corp and Merrill Lynch & Co, selling more than US$60 billion of assets in the process. The bank unveiled an US$11.7 billion deal to end disputes with Fannie Mae on bad home loans this month and joined an US$8.5 billion industry accord to compensate for abusive foreclosures.
Last year "was about resolving as many issues as they could," said Marty Mosby, an analyst at Guggenheim Securities LLC, which manages over US$100 billion, including BofA stock. "While they've had to absorb some losses, they were less than the worst case, and that signifies progress."
The bank, ranked second by assets among US lenders, said revenue declined to US$18.7 billion from US$24.9 billion in the quarter. Consumer and business banking's profit jumped 15 percent to US$1.4 billion as credit costs and expenses eased. Profit at the global banking unit rose US$95 million to US$1.4 billion from a year earlier as firmwide investment banking fees surged 58 percent, the bank said.
The company has booked almost US$50 billion in costs since 2007 including refunds and litigation tied to defective mortgages and improper foreclosures. In September, Moynihan agreed to pay US$2.4 billion to investors who said management hid the extent of Merrill Lynch losses ahead of its 2009 acquisition.
For the full year, profit more than doubled to US$4.19 billion, or 25 cents a share, as revenue slipped to US$83.3 billion from US$93.5 billion.
"We enter 2013 strong and well-positioned for further growth," Moynihan said in the statement.
The lender said on January 7 it was posting more than US$5 billion in pretax fourth-quarter charges to cover the Fannie Mae payments, the foreclosure settlement and mortgage litigation. Results were also skewed by accounting charges tied to changes in the value of the firm's debt and a tax benefit from non-US subsidiaries.
Net income fell in the fourth quarter to US$732 million, or 3 cents a diluted share, from US$1.99 billion, or 15 cents, a year earlier, according to a statement yesterday from the North Carolina-based company. Adjusted for one-time items, profit was 29 cents a share, beating the 20-cent estimate of 18 analysts surveyed by Bloomberg News. Revenue shed 25 percent.
Chief Executive Officer Brian T. Moynihan has spent his first three years cleaning up after his predecessor's takeover of Countrywide Financial Corp and Merrill Lynch & Co, selling more than US$60 billion of assets in the process. The bank unveiled an US$11.7 billion deal to end disputes with Fannie Mae on bad home loans this month and joined an US$8.5 billion industry accord to compensate for abusive foreclosures.
Last year "was about resolving as many issues as they could," said Marty Mosby, an analyst at Guggenheim Securities LLC, which manages over US$100 billion, including BofA stock. "While they've had to absorb some losses, they were less than the worst case, and that signifies progress."
The bank, ranked second by assets among US lenders, said revenue declined to US$18.7 billion from US$24.9 billion in the quarter. Consumer and business banking's profit jumped 15 percent to US$1.4 billion as credit costs and expenses eased. Profit at the global banking unit rose US$95 million to US$1.4 billion from a year earlier as firmwide investment banking fees surged 58 percent, the bank said.
The company has booked almost US$50 billion in costs since 2007 including refunds and litigation tied to defective mortgages and improper foreclosures. In September, Moynihan agreed to pay US$2.4 billion to investors who said management hid the extent of Merrill Lynch losses ahead of its 2009 acquisition.
For the full year, profit more than doubled to US$4.19 billion, or 25 cents a share, as revenue slipped to US$83.3 billion from US$93.5 billion.
"We enter 2013 strong and well-positioned for further growth," Moynihan said in the statement.
The lender said on January 7 it was posting more than US$5 billion in pretax fourth-quarter charges to cover the Fannie Mae payments, the foreclosure settlement and mortgage litigation. Results were also skewed by accounting charges tied to changes in the value of the firm's debt and a tax benefit from non-US subsidiaries.
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