Bank of America Corp. reported a small quarterly loss for common shareholders on Wednesday, largely due to a $5.6 billion charge related to its record settlement with the government over shoddy mortgages that soured when the housing bubble burst.
The results underscore how years after the financial crisis, the No. 2 U.S. bank is still paying for its mistakes, although fund managers and analysts have said the settlement may finally allow the bank to put last decade’s housing crisis behind it.
BofA is the fourth of the six major U.S. banks to report third-quarter results. JPMorgan Chase & Co. and Citigroup Inc. were also hit by big legal expenses.
Chief Executive Brian Moynihan, who took on the additional role of chairman in October, has been working to resolve BofA’s legal and regulatory woes since he took over in 2010.
Four of the bank’s five main businesses were profitable in the latest quarter, the exception being the mortgage business, underscoring the challenge still facing the 55-year-old CEO.
The $5.6 billion litigation expense was related to a $16.65 billion settlement reached with the government in August that was tied the bank’s purchases of Countrywide Financial Corp in July 2008 and Merrill Lynch six months later.
BofA has so far agreed to pay about $70 billion to resolve legal disputes related to the financial crisis – more than double the amount JPMorgan has agreed to pay.
The bank’s shares were down 1.2 percent at $16.32 in premarket trading.
Up to Tuesday’s close, they had risen 5.3 percent since the start of the year, making them the second-best performer in KBW bank index .BKX after Wells Fargo & Co.
The bank posted a net loss attributable to shareholders of $70 million, or 1 cent per share, for the three months ended Sept. 30, compared with a year-earlier profit of $2.22 billion, or 20 cents per share.
Net income including preferred stock dividends fell to $168 million from $2.5 billion.
Analysts had expected the bank to post a loss of 9 cents per share, according to Thomson Reuters. It was not immediately clear if the reported figure was comparable.
Expenses Rise
Total revenue slipped to $21.21 billion from $21.53 billion, while noninterest expenses, including litigation expenses, increased 20.5 percent to $19.74 billion.
Excluding legal expenses, costs in the bank’s Legacy Assets and Servicing division, housing millions of defaulted and delinquent mortgages, fell to $1.3 billion, from $1.4 billion in the second quarter and $2.2 billion a year earlier.
Bond trading revenue, excluding accounting adjustments, rose 11 percent to $2.2 billion as market activity picked up in September. Citigroup’s revenue from fixed income trading rose 5 percent, while JPMorgan’s increased 2 percent.
