Bank of America posts $7.3bn loss
Bank of America, the largest US lender, reported a $7.3bn loss tied to the cost of new federal rules on consumer accounts and credit cards. The shares fell 2pc in early trading.
The third-quarter’s loss of 77 cents a share compared with a loss of $1bn, or 26 cents per diluted share, a year earlier, according to a statement today from the bank.
Excluding one-time gains and costs, the bank earned $3.1bn, or 27 cents a share. The average estimate of 26 analysts surveyed by Bloomberg was 14 cents.
Chief Executive Officer Brian Moynihan, 51, must contend with stricter rules on consumer fees and disclosures and rein in mortgage losses.
A probe by attorneys general in all 50 states focusing on faulty foreclosure documents has raised concern that lenders will forced to buy back billions of dollars of mortgages from investors.
The bank said yesterday it plans to resume foreclosures after an October 8 halt to review its own procedures.
“The foreclosure document issue is a minor problem, but the headlines related to that are a major problem for Bank of America,” Paul Miller, an FBR Capital Markets analyst who has an “outperform” rating on Bank of America, said in an interview before results were released. “Just contesting these foreclosures drags out the time until we have some resolution.”
Revenue net of interest expense rose 2pc from a year earlier to $26.98bn, according to the company. Compared with the second quarter, revenue fell 8.4pc.
“We are adapting to the regulatory environment, credit quality continues to improve, and we are managing risk and building capital,” Moynihan said.
Executives including Moynihan and Barbara Desoer, head of the home lending unit, sought to soothe investor concern last week that mishandled foreclosures may have caused a wave of erroneous evictions, or that the bank may be facing massive expenses tied to fixing faulty court filings.
Moynihan said October 14 that about a third of the homes Bank of America seizes are vacant, and that borrowers in foreclosed homes typically haven’t made payments for 15 to 24 months.
Desoer added the next day that estimates by analysts and investors of costs from foreclosure delays have been “grossly distorted.”
Bank of America took a goodwill charge of $10.4bn because laws enacted this year could slash as much as 80pc of debit-card revenue.
Moynihan said September 14 the company will recoup most of the lost consumer-banking revenue, without providing details. He succeeded Kenneth D. Lewis as CEO at the start of the year.
JPMorgan, the second-biggest US bank by assets, said October 13 that third-quarter profit rose 23pc.
Citigroup, the third-largest, yesterday reported a $2.17bn profit as it reduced its loan-loss reserves by $1.99bn.
Results at both companies exceeded the consensus of analysts surveyed by Bloomberg. Wells Fargo & Co, based in San Francisco, reports tomorrow.
Bank of America shares slid to $12.09 at 7:11am in New York trading today. The stock gained 36 cents, or 3pc, yesterday in New York Stock Exchange composite trading.
The company’s market capitalisation of $123.8bn ranks behind JPMorgan and Wells Fargo among large US financial companies.
The shares slid 8.8 during the third quarter, on concern that another recession was imminent, marking the worst performance in the 24-company KBW Bank Index.
JPMorgan gained 4pc during that period, while Citigroup increased 3.7pc.
The company ranks first in the US by deposits and assets, and second among credit-card and housing lenders.
The acquisition of Merrill Lynch in January 2009 bolstered the company’s corporate and investment-banking operations.