Bank of America profit falls after mortgage-related charges

Thu Jan 17, 2013 12:39pm EST
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By Rick Rothacker

(Reuters) - Bank of America Corp's (BAC.N: Quote) quarterly profit fell 63 percent as it took $5 billion of mortgage-related charges, but the bank showed signs that it is moving past its problems as it shrank the group that deals with its troubled home loans.

BofA, the second-largest U.S. bank by assets, cut 3,000 jobs in its mortgage servicing unit in the fourth quarter and said it could reduce expenses in the division by $1 billion by year-end. It also made more home loans in the quarter, with mortgage volume rising 42 percent from a year earlier as borrowers refinanced at low rates.

However, the Charlotte, North Carolina-based bank faces major questions about how it will boost revenue. Its shares were down 3.7 percent in midday trading, likely on the comparison to stronger earnings at healthier rivals, said Shannon Stemm, an analyst with Edward Jones.

"Relative to other banks, it comes back to, 'What is the earnings potential of Bank of America and where will that growth come from?'" she said, noting the bank has lost market share in recent years in areas such as mortgages and credit cards.

While BofA Chief Executive Brian Moynihan has impressed investors with his ability to generate capital faster than expected, it is unclear if he will be able to boost revenue, Stemm said. "Is he the long-term strategic guy? Probably not," she said.

The bank earned $732 million, or 3 cents a share, in the quarter, down from $2 billion, or 15 cents per share, a year earlier. Analysts' average forecast was 2 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 25 percent to $18.7 billion, with an accounting charge related to the value of the bank's debt contributing to the decline.

But BofA executives touted efforts to gain new business, including hiring mortgage loan officers, small-business bankers and investment advisers in branches. Loans were up 2 percent from the third quarter at $907.8 billion but down 2 percent from the 2011 fourth quarter.   Continued...

The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011. REUTERS/Fred Prouser