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Bank of America profit drops 39% as mortgage woes linger

BofA reports a first-quarter profit of $1.7 billion, down 39% from a year earlier. The results reflect higher mortgage-related and legal expenses. The bank also announces a shift in its executive ranks.

April 15, 2011|By Rick Rothacker

Reporting from Charlotte, N.C. — Bank of America Corp. on Friday reported a first-quarter profit, a shift in its executive ranks and an agreement to settle mortgage loan buyback requests from an insurer.

The Charlotte, N.C., bank, after two consecutive money-losing years, reported a first-quarter profit of $1.7 billion, down 39% from a $2.8-billion gain a year earlier. The results were hurt by higher mortgage-related and legal expenses but helped by an overall reduction in loan losses and improved results in commercial banking and wealth management.

In a surprise move, Bank of America said Chief Financial Officer Chuck Noski, who has been with the company less than a year, would become vice chairman and hand his duties to Chief Risk Officer Bruce Thompson by the end of the second quarter. Noski will be based in Los Angeles.

In a conference call with analysts, Chief Executive Brian Moynihan said that Bank of America continued to make progress recovering from the financial crisis, but that it wouldn't be until after 2012 that the company would reach "normalized" pretax annual income of $35 billion to $40 billion. Meeting that goal depends on lowering mortgage expenses, an improved interest rate environment and better economic conditions, he said.

In a major setback last month, the bank disclosed that the Federal Reserve Board had rejected its request for a modest increase to its penny-per-share quarterly dividend in the second half of this year. Moynihan shared few details but said the Fed's message was basically that it had to deliver on promises to improve its risk management systems and build its capital base.

"We are doing what we need to do," Moynihan said. The bank plans to resubmit its request for a dividend increase.

A key message on the conference call was that Bank of America continued to look toward reducing its workforce, now at 288,000. The bank said Thursday that it was eliminating 1,500 mortgage underwriting and processing jobs. It's also eliminating 2,000 contractors in the mortgage business.

Bank of America's earnings amounted to 17 cents a share. Analysts polled by Thomson One Analytics had estimated that the bank would earn 27 cents a share, although those estimates sometimes exclude one-time expenses.

Revenue was $26.9 billion, down from $32 billion a year ago but up from $22.4 billion in the fourth quarter. The bank is losing consumer banking income after giving up lucrative overdraft fees charged to debit card users. It also saw a decrease in trading revenue.

Of the bank's six major segments, all made money in the first quarter except the consumer real estate services division. That unit lost $2.4 billion, an improvement from a $5-billion loss in the fourth quarter.

Bank of America also announced it had reached an agreement to settle mortgage loan buyback requests from Assured Guaranty. The bank will make a cash payment of $1.1 billion and enter a loss-sharing agreement expected to cost $470 million.

Rothacker writes for the Charlotte Observer/McClatchy.

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