Filed under: Bank of America, Earnings, Banks, Scandals and Lawsuits
NEW YORK -- Bank of America (BAC) said Wednesday that its second-quarter earnings were hit by higher litigation expenses.
The Charlotte, N.C.-based bank earned $2 billion in the second quarter after payments to preferred shareholders, compared with $3.6 billion in the same period a year earlier, a decline of 43 percent.
Revenue fell 4 percent to $21.9 billion from $22.9 billion.
Per share, the bank's earnings worked out to 19 cents, compared with 32 cents a year ago.
The bank's litigation costs of $4 billion crimped earnings by 22 cents a share.
Bank of America also said that it had reached a $650 million settlement Tuesday with American International Group (AIG) to resolve all outstanding residential mortgage-backed securities litigation between the two companies.
The bank said that "substantially all" of the litigation expenses incurred in the second quarter of the year were related to existing mortgage issues that have been previously disclosed.
Like its competitors, Bank of America is still dealing with the fallout from the financial crisis that began in 2007 and the subsequent collapse of the housing market. The bank said in March that it will spend $9.33 billion to resolve a dispute over mortgage securities with the Federal Housing Finance Agency, the regulator that oversees Fannie Mae and Freddie Mac.
However, unlike JPMorgan (JPM) and Citigroup (C), Bank of America has yet to settle a federal investigation into its handling of risky subprime mortgages. Citigroup said Monday that it had agreed to a $7 billion settlement with the Department of Justice, while JPMorgan reached a $13 billion settlement in November.
"We feel like we've gotten a large chunk of this behind us ... Clearly, the DOJ is the most significant matter that's out there remaining," Chief Financial Officer Bruce Thompson said on a call with reporters.
In April, Bank of America was forced to shelve plans to increase its dividend and stock buyback program. The bank said the move came after it realized that it had incorrectly valued securities that it had obtained through its acquisition of Merrill Lynch in 2009. As a consequence, the lender said it needed to hold a higher level of capital.
Bank of America had intended to buy $4 billion of its own stock and raise its dividend from a penny a share to 5 cents a share. The plan had been approved by the Federal Reserve. The bank said May 27 that it had resubmitted its capital plan to the Federal Reserve.
Thompson told reporters Wednesday that he couldn't comment on "supervisory matters."
Bank of America's stock fell 6 cents, or 0.4 percent, to $15.75 in pre-market trading.