By Rick Rothacker
Oct 17 (Reuters) – Bank of America Corp eked out a
third-quarter profit even after taking $1.6 billion 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 percent 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.
