NEW YORK - Bank of America Corp.'s first-quarter income fell 39 percent on higher costs related to its mortgage business and litigation. The bank also settled a claim over faulty mortgage investments and set aside less money to cover soured loans.
The Charlotte, N.C., bank on Friday said that it earned $1.7 billion, or 17 cents per share, compared with $2.8 billion, or 28 cents a share in the first quarter of last year. The earnings fell short of the 28 cents a share estimated by analysts surveyed by FactSet.
Revenue fell to $26.9 billion from $32 billion in the same period last year.
"All the businesses have moved back to profitability except our mortgage business," CEO Brian Moynihan said in a call with analysts.
Bank of America continued to be weighed down by losses, lawsuits and higher costs related to its mortgage businesses. Its real-estate-services business reported a loss of $2.4 billion compared with a loss of $2.1 billion for the same period in 2010.
The bank is fighting lawsuits from investors and insurers who say they were duped into buying mortgage loans that were based on fraudulent documents. Bank of America set aside $1 billion in the first quarter to repurchase those mortgages. That's on top of $4.1 billion that the bank had already set aside in the fourth quarter of 2010 and $526 million in the first quarter of last year.
Litigation expenses, related mostly to mortgages, were up $352 million from the first quarter of 2010.
Bank of America was among 16 of the nation's largest mortgage lenders who were directed by the Federal Reserve and other federal banking regulators Wednesday to reimburse homeowners who were improperly foreclosed upon. The Fed also warned of more fines in the future. Attorneys general of all 50 states are also investigating allegations of improper foreclosures, and the banks will likely pay more fines once the probe is over.
Separately, Bank of America paid $1.1 billion in cash to Assured Guarantee, an insurer that also said the bank should repurchase shoddy mortgages. The bank also entered into an agreement worth $470 million to share losses on insuring additional mortgages.
Much of Bank of America's mortgage-related woes stem from its 2008 acquisition of Countrywide Financial Corp., which was facing bankruptcy after payment defaults and foreclosures.
Last month, Bank of America became the only one of the four largest U.S. banks that wasn't allowed by the Federal Reserve to increase its dividends. Moynihan had promised investors that he would increase dividends in the second half of the year.
Along with the 19 largest banks in the country, it was subject to a "stress test" by the Federal Reserve to see if they were strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to increase dividends. The Fed has now asked the bank to submit a revised plan.
As the largest U.S. bank serving about half of the nation's households, Bank of America also provides a snapshot for the health of the American consumer and the overall economy. The bank said the number of customers who were late on their credit-card payments by 30 days or more fell to near all-time lows in the first quarter. It was the sixth straight quarterly decline.
The bank set aside a total of $3.8 billion to cover losses from loans in the quarter, down sharply from $9.8 billion in the same period a year ago. That reflects an improving economy and fewer customers falling behind on debts.
by Pallavi Gogoi Associated Press Apr. 16, 2011 12:00 AM
Mortgage woes send down BofA's income
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