New York - Bank of America swung to a quarterly loss as the second-biggest US lender booked $6 billion (R63.4bn) of costs tied to mortgage disputes.
The first-quarter loss was $276 million, or 5c a diluted share, compared with a profit of $1.48bn, or 10c, a year earlier, the bank said yesterday.
Adjusted earnings were 35c a share, beating the 27c average estimate in a poll of 12 analysts.
Chief executive Brian Moynihan is in his fifth year of cleaning up after his predecessor’s purchase of Countrywide Financial left Bank of America responsible for billions of dollars in bad mortgages.
Disputes over home loans and foreclosures have cost the firm more than $50bn, including a March 26 federal accord covering mortgage bonds worth $57.5bn sold to Fannie Mae and Freddie Mac.
“The cost of resolving more of our mortgage issues hurt our earnings this quarter,” Moynihan said. “But the earnings power of our business and customer strategy generated solid results and we continued to return excess capital to our shareholders.”
The lender’s shares were down 0.7 percent at $16.25 by 7.32am in New York.
The stock has climbed 5.3 percent this year, outperforming the 0.2 percent decline of the 24-company KBW bank index, on speculation that litigation costs will fade and rising interest rates will improve lending profit margins.
The $6bn in legal costs included $3.6bn tied to the US settlement disclosed last month and a $2.4bn increase in reserves for “previously disclosed legacy mortgage-related matters”, the lender said.
The results included about $900m of settlements of mortgage-bond claims from Financial Guaranty Insurance, the bank said.
Legal settlements were “just another issue that is being filed away and you hopefully don’t have to worry about anymore,” said Marty Mosby, an analyst at Guggenheim Securities. – Bloomberg