Bank of America reports loss on huge legal charges
AFP, New York :
The legal legacy of the housing bust weighed on Bank of America earnings Wednesday, resulting in a quarterly loss even as some operating units posted solid results.
The US banking giant lost $276 million for the first quarter, with the biggest drag coming from $6 billion to settle a pile of lawsuits dealing mostly with BofA’s sale of mortgage-backed securities.
The loss was its first since the second quarter of 2011.
“The cost of resolving more of our mortgage issues hurt our earnings this quarter,” said chief executive Brian Moynihan.
“But the earnings power of our business and customer strategy generated solid results, and we continued to return excess capital to our shareholders.”
BofA’s results translated to a loss of five cents per share, compared with analyst projections for a five cent per share profit.
Analysts had been girding for higher legal expenses, but said Wednesday’s litigation bill topped expectations and suggested more settlements are in the works.
Erik Oja, a banking analyst at S&P Capital IQ, said BofA had passed an important hurdle in March in agreeing to pay $9.5 billion to settle US charges that it sold bad mortgage-backed securities to housing finance giants Fannie Mae and Freddie Mac.
“But the private litigation could continue for a long time,” Oja said. “There are a lots of claims out there”, in addition to other government cases.
The legal legacy of the housing bust weighed on Bank of America earnings Wednesday, resulting in a quarterly loss even as some operating units posted solid results.
The US banking giant lost $276 million for the first quarter, with the biggest drag coming from $6 billion to settle a pile of lawsuits dealing mostly with BofA’s sale of mortgage-backed securities.
The loss was its first since the second quarter of 2011.
“The cost of resolving more of our mortgage issues hurt our earnings this quarter,” said chief executive Brian Moynihan.
“But the earnings power of our business and customer strategy generated solid results, and we continued to return excess capital to our shareholders.”
BofA’s results translated to a loss of five cents per share, compared with analyst projections for a five cent per share profit.
Analysts had been girding for higher legal expenses, but said Wednesday’s litigation bill topped expectations and suggested more settlements are in the works.
Erik Oja, a banking analyst at S&P Capital IQ, said BofA had passed an important hurdle in March in agreeing to pay $9.5 billion to settle US charges that it sold bad mortgage-backed securities to housing finance giants Fannie Mae and Freddie Mac.
“But the private litigation could continue for a long time,” Oja said. “There are a lots of claims out there”, in addition to other government cases.