Bank of America Still Profitable Despite Legal Woes

By Korollos Shalaby

Bank of America Corp reported a small profit on Wednesday, despite dishing out $1.6 billion related to legal settlements.

The results show that the chief executive, Brian Moynihan, has yet to deal with the weight of the acquisitions made during the financial crisis.

Bank of America agreed last month to pay 2.4 million in an agreement on charges that it hid crucial information to shareholders when it bought the investment bank Merrill Lynch & Co at the peak of the crisis. The bank denies the charges.

The bank had already accrued some resources to finance the cost of the deal but said last month that the output of litigation, a tax charge in the UK and an accounting adjustment related to the value of its debt reduced earnings in the third quarter to $0.28 per share.

To boost profits, the bank last year announced a comprehensive program of cost reduction that seeks to eliminate 8 billion dollars annually in costs and 30,000 jobs.

But even with that project, called "New BAC" expenses unrelated to interest rose about 1 percent in the last quarter, to 17.540 million.

The company reported a profit of $ 340 million, which represented a zero profit per share. That compared with a profit of 6.2 billion, or $ 0.56 per share, in the same period last year, when a sale of assets and accounting gains drove the result.

Analysts on average expected a loss of 7 cents per share, according to Thomson Reuters I / B / E / S. It was not immediately clear whether the results were comparable with these estimates.

In its presentation of results, Bank of America shed light on the possible losses from repurchases of bad loans it sold to investors during the housing boom.

It said it could lose up to 6,000 million above its current reserves for claims from Fannie Mae and Freddie Mac and private investors.

Previously, the bank had said that losses could exceed its reserves at 5 billion claims only by private investors.

In a conference call with reporters, Chief Financial Officer Bruce Thompson said the bank still had differences with Fannie Mae regarding the claims and that no agreement had been reached with the signing of the government-controlled mortgage lender.

Bank of America had 16.3 million in claims reserved for repurchases at the end of the third quarter.

Korollos Shalaby is a nationally acknowledged mortgage expert with over 6 years experience as a loss mitigation expert and mortgage finance consultant. He has owned several companies and has been at the forefront of all lending and banking practices since 2006.

Tags: Bank of America, financial crisis, Merrill Lynch