BofA turns tiny profit after giant provision for legal costs
Bank of America Corp. eked out a $340-million profit for the third quarter after earmarking another $1.6 billion for legal costs, but revenue fell by 28%.
The Charlotte, N.C., bank, sent reeling by its 2008 acquisition of Calabasas mortgage lender Countrywide Financial Corp., said the latest charges were for settling lawsuits stemming from its other big takeover target that year: Merrill Lynch & Co.
Former BofA Chief Executive Ken Lewis engineered the deals at the end of a decades-long expansion spree. His successor, Brian Moynihan, has been scaling back many operations in an effort to create a leaner and more profitable company, including drastically curtailing BofA’s mortgage business, once the nation’s largest.
Issuing its quarterly financial report, the bank said Wednesday morning that it earned $340 million, less than a penny a share, during the latest quarter, down from a year-earlier profit of $6.2 billion, or 56 cents a share. Revenue fell from $28.5 billion to $20.4 billion.
The results included $2.7 billion in onetime charges to reflect changes in the bank’s British tax liabilities and valuation of its debt. It had pre-announced those charges, along with the Merrill settlement costs, last month.
Moynihan described BofA as gaining ground in many areas, including higher home lending than in the second quarter and a 27% increase in small-business lending.
But one highly vocal critic, R. Christopher Whalen of investment banker Tangent Capital Partners, said BofA still faces enormous liabilities stemming from investor losses on mortgage-backed securities that Countrywide issued during the housing boom.
“It’s like pulling on a string – it never ends,” Whalen said.
Bank of America under Moynihan “is like winding the movie backwards, going back in time, like ‘Star Trek,’” he said.
BofA shares were up 2 cents at $9.55 in late morning trading in New York. Analysts had expected the bank to show a small loss but record about $1 billion more in revenue than it reported.
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