Bank Of America's Profits Down 37.5 Percent From One Year Ago

CHARLOTTE, North Carolina (Joe Rauch) - Bank of America Corp posted an unexpectedly sharp drop in first-quarter profit as higher expenses from delayed home foreclosures weighed on its mortgage business.

The largest U.S. bank lost more than $2.39 billion in its home loan business as revenue fell and expenses rose. The foreclosure mess that began in the fourth quarter of 2010, with borrowers accusing major banks of repossessing homes without having the right paperwork in place, was a key source of higher costs in the quarter.

The bank also announced a new chief financial officer.

The first-quarter results give some inkling of why the Federal Reserve told the bank in March to rein in its plans to boost dividends, even as competitors were authorized to hike their payouts.

"Bank of America is further behind. And the reason they're further behind is because of what's going on with the mortgage business," said Ben Wallace, analyst at Grimes & Co, with $1 billion under management.

The bank said in March that it did not expect its mortgage business to return to normal earnings until 2014 or later, while most of its other businesses are seen recovering by 2013.

Bank of America shares were down 1 percent to $12.99 in morning trading. The shares fell 1.5 percent after JPMorgan Chase & Co's results on Wednesday showed the pressure facing consumer lending businesses.

JPMorgan, the second-largest U.S. bank, said it suffered extraordinarily high losses on mortgage-related issues in the first quarter. "Unfortunately, these losses will continue for awhile," said JPMorgan Chief Executive Jamie Dimon.

Bank of America did manage to earn $2 billion in the latest quarter, its first profit since the second quarter of 2010. It faced big mortgage and card-related losses throughout the second half of last year.

Its Merrill Lynch brokerage business provided a bright spot in the quarter, reporting sharply higher revenue and client assets as well as a net increase of nearly 200 financial advisers.

Bank of America, built through a series of acquisitions over decades, made an ill-fated purchase in 2008 when it bought mortgage lender Countrywide Financial Corp as the financial crisis was intensifying. The purchase gave Bank of America more subprime mortgages, home equity loans, and other assets that have generated big losses. The bank needed two government rescues during the financial crisis; it has repaid the money it received.

Chief Executive Brian Moynihan, who took the helm in early 2010, is trying to fix the bank by cutting costs and selling more products to retail customers, but he faces as uphill battle.

Bank of America's results are closely tied to the health of U.S. consumers, who have been reducing their debt as they wrestle with stagnant wages and high unemployment. The Charlotte, North Carolina-based bank does business with one of every two U.S. households.

The bank's loan book fell 8.5 percent in the first quarter from the fourth quarter, to $932.43 billion, due mainly to a decline in consumer loans.

Moynihan has put new people in charge of many areas of the bank, but changes are already underway in the executive suite. On Friday the bank said Bruce Thompson, its chief risk officer, will become chief financial officer by the end of the second quarter. The current CFO, Charles "Chuck" Noski, will become vice chairman of Bank of America.

Noski took over as CFO in May 2010 and lives in California. He had planned to move to Charlotte this summer. A serious family illness prevented the move, the bank said.

It said it had settled a mortgage-related lawsuit with Assured Guaranty, a bond insurer, in an agreement whose cost is estimated to be $1.6 billion.

On a conference call with investors, Moynihan said the bank does not know what the process will be to resubmit its dividend hike request with regulators.

Bank of America posted first-quarter net income of $2.0 billion, or 17 cents per share, down from $3.2 billion, or 28 cents per share, in the same quarter a year ago.

Analysts on average had forecast earnings of 27 cents a share, according to Thomson Reuters I/B/E/S.
The loss in its residential mortgage unit of more than $2.39 billion compared with a loss of $2.07 billion a year earlier.

Overall expenses rose in the mortgage business, but write-offs of bad loans actually fell: Net charge-offs of residential mortgages were $905 million, compared with $1.07 billion a year earlier.

(Reporting by Joe Rauch, additional reporting by Dan Wilchins in New York and Dominic Lau in London; editing by John Wallace)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[shadow013]

06:33 AM on 04/19/2011

This mortgage mess is so much larger than the Savings & Loan debacle with much more depth that will take years to remedy. That's because the "paperwork problems" involve forgery (CBS 60 Minutes reported well) and breaking chain of title on up to 60% of US mortgages through using MERS instead of recording changes in loan ownership at county recorders offices in county where property was located. Ironically what affects real property in the US is a product of "world government". In other words, deregulating our financial system 1999 to comply with World Trade Organization combined commercial banking with investment (casino) banking so we could repeat 1929. Also ironically during Great Depression the US extended new mortgages to 20% of homeowners to keep them in their houses instead of favoring banks. HAMP facilitaties foreclosures, not saving homeowners.

[Duppy]

03:24 PM on 04/18/2011

The entire country I bet is rooting for this bank to fail.

[magpie111]

10:41 AM on 04/17/2011

I don't believe a single word out of their lying mouths. Big banks have a license to steal, and they use it every day. They only managed to make 2 billion dollars in three months. Must be slipping, bring on more fees!

[johnnymainstreet]

03:30 PM on 04/17/2011

Magpie111, totally agree. I might add that in addition to having a license to steal, they also have a license to create money out of nothing. And yet they still can't make a profit. That's the part I don't understand.

[johnnymainstreet]

03:34 PM on 04/17/2011

Funny thing, I just got a notice from BOA that they were raising my credit card rate to 29.9% I've never been late with them or anyone else in 30 years. Interesting how this just showed up the same week that they informed us that profits were down 37.5% looks like their trying to make it up as qucik as possible. Guess what BOA, my card will get cancelled on Monday. Liars and Thieves, Inc.

[jcaunter]

04:06 AM on 04/17/2011

This will end well... for Mainstreet. But maybe not so well for Bernanke and Obama. When the fraud pyramid implodes all the bodies will float to the surface.

[builderman55]

10:37 AM on 04/16/2011

BofA should no longer exist. The government should break it up into smaller banks and then regulate them more closely, as should be done with ALL TBTF banks.

[irochfpst]

10:18 PM on 04/15/2011

they won't mention the impact of people moving their money out of bank of america will they?
maybe we can force them out of business and let the investors bite the bullet instead of the taxpayers.

[anastasiabeaverhousen]

09:37 PM on 04/15/2011

Just three words, kids: Credit unions. Now.

[Tom95134]

01:42 PM on 04/15/2011

Cities need to start bringing suit against these banks to foot the bill for maintaining these foreclosed and abandoned properties they are carrying on their books. It is possible that if a municipality makes repairs for performs maintenance on the property, e.g., mows the lawn, the municipality could bring a mechanics lien against the property and if the mortgage holder fails to pay it the municipality could own the property.

Cities gave large tax deals to developers and indirectly the banks who financed the development. Now let the taxing authority take back its pound of flesh by taking legal action against the banks who hold the mortgage.

[magpie111]

10:43 AM on 04/17/2011

That's a great idea! After all, cities would charge us for maintaince.

[cats530]

12:49 PM on 04/15/2011

"If mortgage-backed securities aren’t in fact “mortgage-backed,” investors who bought these securities from Countrywide could hold Bank of America accountable. “If Countrywide’s practice was to hold onto the note, then investors in this pool and others may question whether the security was constructed properly and legally and may be able to require Bank of America to buy back their securities”

http://4closurefraud.org/2011/04/14/did-federal-banking-regulators-inadvertently-expose-massive-mbs-securities-fraud-as-part-of-fraudclosure-investigation/

[cats530]

11:55 AM on 04/15/2011

"Just as JP Morgan, Bank of America takes accounting manipulation to the next degree and lowers its credit loss provision to $3.8 billion, down $6.0 billion from a year earlier, and $2.3 billion from Q4, even though the actual amount of charge offs sequentially barely declined from $6.7 billion to $6.0 billion. "The provision for credit losses was $3.8 billion, which was $6.0 billion lower than the same period a year earlier. The provision was lower than net charge-offs, resulting in a $2.2 billion reduction in the allowance for loan and lease losses, including the reserve for unfunded commitments, in the first quarter of 2011 (net of reserve additions of $1.6 billion related to consumer-purchased credit-impaired portfolios as noted below). This compares with a $1.0 billion reduction in the first quarter of 2010." Even so, the company still was unable to goal seek its EPS consensus of $0.26, coming in at $0.17. Without this accounting gimmick, BAC would have had a sizable loss in Q1."

http://www.zerohedge.com/article/bank-america-revenue-declines-eps-misses-consensus-026-017-credit-loss-provisions-plunge-72

[Milstar]

06:00 PM on 04/15/2011

Zerohedge is the best blog about the economy out there! What worries me the most is how clueless management is about the health of the bank. They also have a 72 billion dollar putback claim against them from Pimco, Blackrock, and the NY Fed.

[cats530]

11:51 AM on 04/15/2011

"Bank of America continues crawling along the razor's edge, with the biggest threat to its continued business model: ongoing legacy CFC fraud being largely unprovisioned for. In the just released earnings presentation, we learn that the bank provisioned only $1 billion for its ongoing Reps and Warranties liability, after charging off a minuscule $238 million - the lowest in over a year, bringing its total liability accrual to $6.2 billion. Yet over the same period total outstanding claims by counterparty surged by nearly 30%, from $10.7 billion to $13.6 billion, primarily due to GSEs, although the steady putback rise in monoline GSE claims is relentless (and appears to have gotten to the bank considering the just announced Assured Guaranty settlement, see below). Total outstanding claims at the end of Q1 totalled $13.6 billion. Also someone please explain to us how Merrill Lynch (see footnote 2) is one of the parties responsible for filing new claims against its parent and rescuer Bank of America."

http://www.zerohedge.com/article/bank-america-provisions-1-billion-reps-warranties-liability-q1-claims-jump-29-billion-pays-m

[ssassy78]

11:47 AM on 04/15/2011

Good. I hope that their shoddy and unfair performance allows them to become 'Too Arrogant to Succeed." And I hope Chase is right behind them.

[cats530]

11:51 AM on 04/15/2011

Along with Wells and Citi.

[ssassy78]

01:28 PM on 04/15/2011

I'd love to see a surge in community banking. It's time for people to let go of the Wal-mart philosophy and get back to looking out for those around them. I advocate purchasing as many products from Farmer's Markets and local growers, as well. The only way we, the little guy, can get their attention is through our wallets and our votes. If we use both effectively, they will be able to "trickle down" less of the economic pain they are spreading to everyone not in the top 10%.

[bejayech]

11:56 AM on 04/15/2011

Wouldn't that be great! Another 1 million plus unemployed.

[ssassy78]

01:25 PM on 04/15/2011

I have far more faith in the American people than that. I believe that if we dump the oligarchs that currently "run" (break, in my opinion) the system, a whole group of innovative and unafraid citizens would emerge. Unfortunately, far too many in our current populace are "afraid" of the doomsday the elite sell us. The use of the common man to protect the interests of the entrenched and powerful is what is killing us. Trust me, if it were in their benefit, whether good or bad times, they would lay off a million people; they don't need a recession for an excuse.

[irochfpst]

10:22 PM on 04/15/2011

whats your one million compared to the number of unemployed and homeless people that the big banks were responsible for. while i have some empathy for you personally, i have no such feelings for your bank.

[demshuff]

11:17 AM on 04/15/2011

Oh no, this is horrible.........Timmy, we need a bailout.

[johnnymainstreet]

03:40 PM on 04/17/2011

I'm sorry my turbo tax program is busy calculating my 2010 tax return at the moment. If I can,I will look into this next week and work something out. Seem like my program has a little glitz and I might owe $600.00 on my return? Not sure if I should pay it or not.

Timmy

[loki]

11:04 AM on 04/15/2011

dont cry for them Argentina. They will get back everydime they claim they lost, and then some. Besides, ivy greed capitalist claim to have lost money, if they dont make as much as they wanted to. By that I mean, if they say they want to make 400 billion this year, and only make 399 billion in clear profits, then they claim they lost money.
But the will not lose a dime. They wont get a bail out from our politicians as its tovolatilee of an election issue right now, but they will still get our tax money via the Fed Reserve. The gov hands them our tax money through the back door, and the Fed hands it to the ivy greed capitalist. and everythinginvolvedd pretends that as long as they say they got it from the Fed, no one will figure it out. But its still our tax money, and its still handed over to the top 1%. Isn'tnt America just the greatest place on earth?

[blackranger]

10:22 AM on 04/15/2011

This is just the bank showing the real losses on the foreclosures, they have a lot more on their books that will have to be written off as they foreclose on more properties. I noted that one of their little tricks is to move assets (mortgages) they see as questionable over to the books of Country Wide (they did this to one of my clients) so that they can show the losses as Countrywide and not theirs. Beware investors, this bank is a scam now.

[loki]

11:06 AM on 04/15/2011

name a large corporate bank that isnt a scam?

[8thplane]

03:49 PM on 04/15/2011

I Can't