Bank of America Corp eked out a third-quarter profit even after taking $1.6-billion (U.S.) of litigation charges, as the second-largest U.S. bank set aside less money to cover bad loans.
The results show Chief Executive Brian Moynihan is still haunted by acquisitions forged during the financial crisis. The bank last month agreed to pay $2.4-billion to settle claims that it hid crucial information from shareholders when it bought investment bank Merrill Lynch & Co at the height of the financial crisis.
Bank of America had already set aside some money for the settlement, but it said last month that the pact, a UK tax charge and an accounting charge related to the value of its debt would reduce third-quarter earnings by 28 cents per share.
To boost profits, the bank launched a broad cost-cutting program in 2011 that aims to eliminate $8-billion in annual expenses and 30,000 jobs.
But even with that project, called “New BAC,” noninterest expenses rose nearly 1 per cent in the latest quarter to $17.54-billion.
The bank on Wednesday posted net earnings of $340-million, or nil per share, for the quarter, compared with $6.2-billion, or 56 cents a share, in the same period a year earlier, when the sale of assets and accounting benefits boosted earnings.
Analysts’ average earnings estimate was a loss of 7 cents per share, according to Thomson Reuters I/B/E/S. It was not immediately clear if the results were comparable.
In its earnings presentation, Bank of America provided more clarity on possible losses from repurchases of soured loans that it sold to investors during the housing boom. It said it could lose up to $6-billion above its current reserves on claims from Fannie Mae and Freddie Mac as well as private investors. It previously said its losses beyond reserves could be up to $5-billion for private investors only.
In a conference call with reporters, Chief Financial Officer Bruce Thompson said the bank still has disagreements with Fannie Mae over claims and has not reached any settlement with the government-controlled mortgage finance company.
Bank of America had $16.3-billion in reserves for repurchase claims at the end of the third quarter.Report Typo/Error