Loss reported by Bank of America (NYSE:BAC)

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By Daniel Craine on October 15, 2014 Financial

In a release today Bank of America (NYSE:BAC) reported that loss for this quarter is less than expected for its shareholders. Increase in profits from trading has assisted the Bank to cover $5.6 billion expenses it has to pay to the government against its carelessly managed mortgages. It is evident that Bank of America which ranked 2^nd in the U.S. continues to bear penalties for its blunders even though financial crisis was over many years ago. However, analysts and fund managers claim that with this latest settlement of $ 5.6 billion, the bank will be able to come out of the housing crisis of last decade.

Out of the six top U.S. banks, Bank of America is the fourth one which has reported financial results for the third quarter. In addition, JPMorgan Chase & Co (NYSE:JPM) and Citigroup Inc (NYSE:C.) have to bear substantial legal expenses. Brian Moynihan has been working hard to take out the bank from its legal and regulatory difficulties since 2010, when he took over as the CEO of Bank of America (NYSE:BAC). Brian took over the additional responsibility of chairman in October and is facing challenges in mortgage business since the bank’s other main four out of five businesses reported profits in the previous quarter.

In August, the bank negotiated a settlement of $16.65 billion with the government for its purchases of Countrywide Financial Corp in July 2008 and Merrill Lynch after six months.
$5.6 billion was paid as lawsuit expenses against this settlement. In order to settle legal disputes associated with the financial crisis, Bank of America (NYSE:BAC) has agreed to pay around $70 billion which is more than twice the amount JPMorgan would be paying.

In early trading, bank’s share value was $16.12 indicating a decline of 2.4 percent and KBW bank index .BKX lost 1.83 percent. In the third quarter, $70 million or 1 cent per share was the reported net loss of Bank of America (NYSE:BAC) for its shareholders; whereas, last year a gain of $2.22 billion or 20 cents per share was declared. Therefore, net income inclusive of preferred stock dividends registered a decline from $2.5 billion to $ 168 million. Analysts had estimated an average loss of
9 cents per share for the bank but it came out to be just 3 cents per share as per the calculations of Thomson Reuters I/B/E/S.

Total revenue of the bank registered a dip from $21.53 billion to $21.21 billion since noninterest expenses increased 20.5 percent and stood at $19.74 billion. The market activity was bullish in September so bank’s revenue from bond trading increased 11 percent to $2.2 billion. On the other hand fixed income trading revenue of Citigroup and JPMorgan increased 5 percent and 2 percent respectively. Bank of America (NYSE:BAC)’s largest business, retail banking profit increased
3.9 percent to $1.86 billion, while investment banking fees reached $1.4 billion – a 4 percent rise. Wealth and investment management profit also register an increase of 12.9 percent to $813 million.