Bank of America Corp., the largest U.S. bank, reported weaker-than-expected revenue and a second straight quarterly loss after its limping mortgage business triggered write-downs and legal settlements.
Bank of America's Merrill Lynch businesses — including retail brokerage and investment banking — were profitable but did not make enough money to overcome the bank's massive losses from mortgages.
The bank reported a fourth-quarter loss of $1.57 billion, or 16 cents a share, compared with a loss of $5.2 billion, or 60 cents, a year earlier.
Excluding the mortgage business write-down, the bank earned $756 million, or 4 cents a share.
Analysts had expected earnings of 14 cents a share, according to Thomson Reuters I/B/E/S.
As the financial crisis was ramping up, then-Chief Executive Kenneth Lewis bought Countrywide Financial Corp. for $4.2 billion. Current CEO Brian Moynihan is still coping with the aftermath.
In the fourth quarter, Bank of America took a write-down of $2 billion to recognize the declining value of Countrywide. The bank also set aside $4.1 billion for legal costs linked to home loans it is buying back from investors or is likely to buy back.
"Countrywide is still hurting them and it will continue to. It's like a tooth being pulled — it's only going to feel good when it's done," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel Inc. in Cincinnati, which does not own Bank of America shares.
Bank of America is the only major bank this week to post a fourth-quarter loss, and it missed analysts' revenue estimates. The bank posted revenue of $22.7 billion, below an expected $24.9 billion and its third straight quarterly decline. Revenue shrank 11% from a year earlier.
The company's home loan business has lost more than $12 billion in the last two years. Chief Financial Officer Charles Noski said in a conference call that the bank might have to set aside an additional $7 billion to $10 billion to cover legal settlements with mortgage investors.
The bank's shares closed down 2% at $14.25 after the earnings news.
Despite the shrinking revenue, the bank posted loan growth of 0.7% compared with the third quarter, an increase of $940 billion.