Record mortgage settlement pushes Bank of America into Q3 loss

[London] Bank of America Corp, the No 2 US bank by assets, reported a small quarterly loss applicable to common shareholders on Wednesday, largely due its record US$16.65 billion mortgage settlement with the U.S. government in August.

The bank posted a net loss attributable to shareholders of US$70 million, or 1 cent per share, for the three months ended Sept 30, compared with a year-earlier profit of US$2.22 billion, or 20 cents per share.

Net income including preferred stock dividends fell to US$168 million from US$2.5 billion.

Analysts had expected the bank to post a loss of 9 cents per share, according to Thomson Reuters I/B/E/S. It was not immediately clear if the reported figure was comparable.

The bank's shares were up 0.4 per cent at US$16.59 in premarket trading. Up to Tuesday's close, they had risen 5.3 per cent since the start of the year, making then the second best performer in KBW index of bank stocks after Wells Fargo & Co. "We saw solid customer and client activity and improved profitability in most of our businesses relative to the year-ago quarter," Chief Executive and Chairman Brian Moynihan said in a statement.

Fund managers and analysts have said the settlement, tied to the bank's purchases of Countrywide Financial Corp in July 2008 and Merrill Lynch & Co six months later, may finally allow the company to put last decade's housing bubble behind it.

Bank of America is the fourth of the Big Six US banks to report third-quarter results. JPMorgan Chase & Co and Citigroup Inc were also hit by big legal expenses.

Bank of America's litigation costs rose to US$5.6 billion in the latest quarter, from US$4.0 billion in the second quarter and US$1.1 billion in the third quarter of 2013.

Bank of America has so far agreed to pay about US$70 billion to resolve legal disputes related to the financial crisis - more than double the amount JPMorgan has agreed to pay.

Firmwide investment banking fees rose 4 per cent in the third quarter from a year earlier to US$1.4 billion.

Bond trading revenue, excluding accounting adjustments, rose 11 percent to US$2.2 billion as market activity picked up in September. Citigroup's revenue from fixed income trading rose 5 per cent, while JPMorgan's increased 2 percent.

Equities sales and trading revenue increased 6 per cent to US$1.0 billion on the same basis.

Profit in the bank's largest business, retail banking, rose 3.9 per cent to US$1.86 billion, driven by lower provisions for credit losses. The business includes credit cards.

Profit from wealth and investment management rose 12.9 per cent to US$813 million as asset management fees rose 19 per cent to a record US$2 billion. REUTERS