Bank of America’s profit hit by $4 billion litigation expense
Bank of America’s net income fell 43% in the second quarter as the bank recorded a $4 billion pretax litigation expense and lower revenue.
Still, the results for the period were better than expected, a trend in many major banking second-quarter reports issued over the past several days.
Overall, BofA (BAC) reported net income of $2.29 billion, or 19 cents a share, down from $4 billion, or 32 cents a share, a year ago. The latest period included about 22 cents per share in litigation expenses. Revenue, net of interest expense, slid 4.3% to $21.96 billion.
Analysts surveyed by Bloomberg had expected an adjusted profit, excluding charges, of 29 cents a share on $21.6 billion in revenue.
“The economy continues to strengthen, and our customers and clients are doing more business with us,” Chief Executive Brian Moynihan said in a prepared statement. He touted several positive indicators: customers are spending more, brokerage assets have climbed by double digits and corporate clients are turning to BofA to finance business expansions and mergers.
Several major U.S. banks have reported second-quarter results that have exceeded expectations for the latest quarter, and many of the top executives at those companies have struck a bullish tone about the state of the U.S. economy as they look ahead to the back half of the year. Executives at Wells Fargo (WFC) and Citigroup (C), for example, said the U.S. economy is gaining strength by adding jobs and as consumer spending increases. The housing market is also improving, according to some of those executives.
At BofA, consumer and business banking total revenue slid about 0.8% to $7.37 billion from a year ago due to lower net interest income and slightly lower card income, offset somewhat by higher service charge income.
Revenue also slid for the consumer real estate services business, hurt by fewer loan originations as well as lower servicing income. Still, revenue grew modestly for the global wealth and investment management business and for global banking.
Meanwhile, BofA also disclosed it reached a $650 million settlement with American International Group (AIG) to resolve residential mortgage-backed securities claims. The settlement was covered by litigation reserves as of June 30.