BofA posts loss on mortgage problems
CHARLOTTE, North Carolina (Reuters) - Bank of America Corp, the largest U.S. bank by assets, reported a second straight quarterly loss as mortgage woes continue to saddle the bank with billions in problem home loans.
The results highlight the mixed outcome of the two largest bets the bank's former chief executive, Kenneth Lewis, made at the height of the financial crisis in 2008 -- the purchases of Countrywide Financial Inc and Merrill Lynch & Co.
Bank of America is still coping with Countrywide's loan woes nearly three years after buying the largest U.S. subprime mortgage lender.
In the fourth quarter, the bank recognized a $2 billion writedown in the value of its mortgage business, and a $4.1 billion provision for future mortgage repurchase claims.
"Countrywide is still hurting them and it will continue to. It's like a tooth being pulled -- it's only going to feel good when it's done," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel Inc in Cincinnati.
BofA Chief Executive Brian Moynihan, speaking on CNBC, said the U.S. housing market would continue to bump along the bottom, and the banking industry would be dealing with related problems for years to come.
But BofA's global banking and markets unit, combined with its global wealth and investment management arm, which includes Merrill Lynch's investment bank operations and retail brokerage, earned $1.06 billion in the fourth quarter.
"Last year was a necessary repair and rebuilding year," Moynihan said in a prepared statement announcing the quarterly earnings. "Our results reflect the progress we are making at putting legacy -- primarily mortgage-related -- issues behind us."
Bank of America shares were down 1.2 percent to $14.36 in premarket trading.
CHARGES WEIGH
The quarter was the second straight to include large one-time charges for the bank, and pushed it to a second straight quarterly loss after two consecutive quarterly profits for first-year CEO Moynihan.
In the third quarter, the bank reported a $10 billion writedown of its cards business due to new curbs on debit card fees banks can charge merchants.
Moynihan is trying to turn around a bank cobbled together by Lewis primarily through acquisitions over the last decade. Moynihan is a former FleetBoston executive, a bank that BofA bought in 2003.
BofA's most profitable division in the fourth quarter, its cards unit, was built mainly by the purchase of Delaware-based credit card giant MBNA Corp in 2005 for $35 billion.
While the bank's credit costs continue to shrink -- nonperforming loans declined 8.6 percent from a year earlier to $32.6 billion in the fourth quarter -- revenue is also declining.
Total revenue fell 11 percent to $22.7 billion, the third straight quarterly decline.
Despite the shrinking revenue, the bank posted loan growth of 0.7 percent from the third quarter, rising to $940 billion.
The bank reported a fourth-quarter shareholder loss of $1.57 billion, or 16 cents a share, compared with a loss of $5.2 billion, or 60 cents a share, a year earlier.
Excluding the mortgage business writedown, the bank earned $756 million, or 4 cents per share.
Analysts had expected earnings of 14 cents per share, according to Thomson Reuters I/B/E/S.
The year-earlier results included a one-time charge of $4 billion related to the Troubled Asset Relief Program.
(Additional reporting by Maria Aspan; editing by John Wallace)