Underscoring the still-lingering effects of the mortgage mess, Bank of America reported a fourth-quarter loss of $1.2 billion, or 16 cents a share, as write-downs and charges tied to the weak housing market and soured home loans offset stronger results in the company’s core banking business.
For the full year, Bank of America lost $2.23 billion, or 37 cents a share.
The earnings report was complicated by a series of one-time gains and losses, most notably a $4.1 billion charge for mortgage repurchase claims, including the impact of an agreement late last month with Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, to buy back troubled loans. In addition, Bank of America took a noncash charge of $2 billion to reflect a write-down of goodwill on its acquisition of Countrywide, the subprime mortgage giant, in 2008.
Excluding the goodwill charge, Bank of America earned $756 million, or 4 cents a share in the fourth quarter, on revenue of $22.6 billion. The consensus among Wall Street analysts called for a profit of 14 cents.
As the nation’s largest bank, Bank of America, based in Charlotte, N.C., is closely watched as a proxy for the broader financial services industry, especially since it provides everything from consumer and business loans to retail banking to sophisticated Wall Street trading through its Bank of America Merrill Lynch unit.
Trading results were disappointing, with results in fixed-income trading hurt in the fourth quarter as the bond market rally reversed course and bond prices unexpectedly fell. It’s the same issues that dogged the reports of Goldman Sachs and Morgan Stanley this week.
Like other big banks, Bank of America reduced the reserves it had set aside to protect against potential losses across its banking businesses. That release of reserves bolstered overall profit by more than $1 billion. Also helping were gains from the sale of the majority of its stake in BlackRock, the giant asset manager.
The agreement with Fannie and Freddie, painful as it was in the quarter, helped ease investor worries about one major liability from mortgage loans made by Countrywide, the subprime specialist Bank of America acquired in 2008. But the fate of tens of billions of other troubled Countrywide loans, owned by private investors, remains a worry.
“Last year was a necessary repair and rebuilding year,” said Brian T. Moynihan, Bank of America’s chief executive. “Our results reflect the progress we are making at putting legacy – primarily mortgage-related – issues behind us. We earned $10.2 billion before goodwill impairment charges, rebuilt our capital positions, reduced the risk on our balance sheet, and shed more than $19 billion in assets that didn’t directly serve customers and clients.”