B of A Profits Fall Due to Mortgage Settlements
Bank of America saw its profits fall in the fourth quarter after several mortgage-related problems were settled as a result of the financial crisis.
In 4Q 2012, the second largest U.S. bank earned $700 million, or 3 cents per diluted share, compared to $2 billion, or $0.15 per diluted share, during the same time period last year.
Overall, revenue declined by 25% to $18.9 billion. But without all of the legal charges, B of A claimed revenue would have been $22.6 billion.
For the year, B of A’s profit more than doubled compared to 2011 from $1.4 billion to $4.2 billion.
“We enter 2013 strong and well-positioned for further growth, stated Bank of America CEO Brian Moynihan in a statement.
The latest financial results suffered due to one-time charges that needed to be handled to improve the bank’s long-term outlook.
Earlier this month, the Charlotte-based bank reached an approximate $11 billion settlement with Fannie Mae to resolve repurchase issues. Also, the bank was one of 10 servicers to come to an $8.5 billion agreement with the Office of the Comptroller of the Currency and Federal Reserve over charges of wrongful foreclosure practices.
Despite the lower profits, the bank’s overall outlook looks better due to an increase in residential home loan volumes as well as decreases in mortgage delinquencies.
B of A reported that it funded over $22 billion in residential home loans and home equity loans during the fourth quarter, which is up 41% from 4Q 2011.
Furthermore, nonperforming assets decreased by $1.4 billion quarter-over-quarter, or 5.5%. B of A said 24% of the nonperforming assets are consumer real estate loans that are current on contractual payments.
Another bright spot for B of A was that the number of 60-day delinquent first mortgage loans declined by 163,000 during the quarter to 773,000. Additionally, 30-day delinquent loans were down 26% from a year ago.
“We addressed significant legacy issues in 2012 and our strengths are coming through,” said Bank of America CFO Bruce Thompson. “Capital and liquidity remain strong and credit continues to improve. Our primary focus this year is to grow revenue, manage expenses and drive core earnings growth.”